SA bonds sharply lower as US bonds weaken further
South African government bonds were sharply weaker on Wednesday afternoon as US bonds continued to soften.
The local market was following a weaker rand, which came under pressure from a stronger dollar, as well as local strike action, which dampened sentiment.
The benchmark US 10-year yield rose to 3.0208%, sending equity markets sharply lower, and the dollar gained traction against the major currencies, notably the euro. Higher government bond yields typically mean higher costs for companies and consumers to borrow money and can make bonds look more attractive relative to stocks, Dow Jones Newswires reported.
"Still, many investors believe yields at 3% are manageable for the stock market, particularly with no signs of runaway inflation that would force central banks to pick up the pace," the newswire said.
"What is most important to equity markets is whether we see a further sell-off in US treasuries or whether yields stabilise around this level, as they did in 2014,"
Edward Park, investment director at Brooks Macdonald, wrote in a note.
At 2.53pm, the R186 was bid at 8.33% from 8.22% and the R207 at 7.22% from 7.13%. The rand was at R12.4662 to the dollar from R12.3264.
The US 10-year was last seen at 3.0151% from 2.9748%.