Bonds slightly firmer as market relishes rand’s new safe-haven status
South African government bonds were slightly firmer in thin trade on Friday afternoon, as the market benefited from the rand’s newly found supposed safe-haven status.
According to reports the liquid rand has become a favoured safe-haven currency, based on the expected economic reforms and a greater focus on growth under the administration of President Cyril Ramaphosa.
Relatively higher local interest rates are also supporting the rand in the traditional carry-trade, where investors borrow low-rate currencies and invest in higher-yielding ones.
From one of the most volatile currencies in the world, the rand has been remarkably stable over the past month in an environment of a sharply weaker Russian rouble and Turkish lira.
In the past, the rand has usually weakened in line with softer emerging-market currencies, but has instead gained nearly 3% against the greenback so far in 2018.
This development has also been positive for local bonds, with them proving to be the best-performing asset class so far in 2018, outdoing equities and cash. The benchmark R186 has improved 14.8% so far, from a 2017 worst level of 9.47%.
At 3.04pm the R186 was bid at 8.06% from 8.075% and the R207 at 6.915% from 6.925%.
The rand was at R12.0533 to the dollar from R12.0604.
In the US the benchmark 10-year slipped above 2.8% again in risk-on trade, which benefited stocks, following the release of upbeat earnings results from some top companies.
US bonds might, however, benefit soon from renewed risk-off trade and global-trade tension.
Dow Jones Newswires said in a report that the White House planned to tighten pressure on China, with a plan for fresh tariffs and a threat to block Chinese technology investments in the US.
The US 10-year treasury was last seen at 2.835% from 2.849%.