South African bonds weaken as US and UK yields continue to rise
South African government bonds were weaker on Thursday on a softer rand, as global bond investors adapted to rising US yields, which show little sign of abating any time soon.
After crossing 3% earlier this week, some analysts reckon the yield on the benchmark US 10-year could touch 3.2% in the short term. It rose to a seven-year high of 3.093% on Wednesday, and reached 3.11% in intraday trade on Thursday, Dow Jones Newswires said.
"A move above 3% has been cited as a psychologically significant level that could make equities appear less attractive," the newswire said.
UK gilt yields also rose on a firmer pound amid reports that Prime Minister Theresa May’s Conservative government had given the green light to a customs arrangement whereby the UK would retain closer links with the EU than previously expected.
FxPro analysts said that that could mean the UK would stay in the EU customs union beyond 2021.
The government agreed on a new "backstop" earlier this week to avoid a hard border in Ireland, despite objections from foreign secretary Boris Johnson and environment secretary Michael Gove, FxPro said.
The pound rallied in response, to its best level against the dollar since the middle of January, while the yield on the UK 10-year gilt also rose.
At 3.01pm, the R186 was bid at 8.51% from 8.455%. The R207 was at 7.36% from 7.31%. The rand was at R12.5521 to the dollar from R12.4428.
The US 10-year treasury was at 3.0983% from 3.0973% and the UK gilt was at 1.5325% from 1.5019%.