Bonds extends gains after upbeat inflation report
South African government bonds gained some momentum on Tuesday afternoon, after better-than-expected inflation data provided scope for the Reserve Bank to cut interest rates, when its monetary policy committee meets next week.
"Risk projections that would have worried the Bank a few months ago have dissipated enough to provide scope for a cut in rates," Investec Asset Management analyst Malcolm Charles said.
Inflation moderated to an annual rate of 4% in February, Statistics SA data showed earlier in the day, from 4.4% in January.
Local bonds are sensitive to changes in inflation, which is one of the factors the Bank monitors to decide on rates.
The dose of good news on inflation coincided with the possible of departure of South African Revenue Service commissioner Tom Moyane, who President Cyril Ramaphosa suspended on Monday.
Ramaphosa has made good on his pledge to overhaul government institutions and state-owned enterprises‚ which have long been a drag on the fiscus and have been flagged by ratings agencies as a potential danger to the country’s debt rating.
"The new ANC leadership is slowly but surely getting rid of bad elements to ensure good corporate governance. Government will be able to deliver on its budget projections if institutions are well run, as funding costs will ease," Charles said.
At 2.57pm, the R186 was bid at 8.075% from 8.17% and the R207 at 6.70% from 6.78%. The rand was at R11.9547 from R12.0331.