The relief rally in the currency and bond markets following the ANC’s conference in December was spectacular: the South African bond market returned an impressive 5.7% for the month, followed by a respectable 5.86% in the first two months of 2018. Is further Ramaphoria justified or has the time come for a more defensive position on domestic bonds? We believe there are cyclical and secular tailwinds that should provide further support for the bond market over the short to medium term. Despite the significant rally in domestic bonds, emerging-market bond yields have fallen substantially more than ours over the past two years, suggesting that South African bonds continue to offer relatively attractive yields. In terms of cyclical support, the relative political stability we’re enjoying after President Cyril Ramaphosa’s victory means we can finally divert our attention from the politics to the macro drivers. In particular, it means the Reserve Bank can shift its focus to more orthodox i...

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