EDITORIAL: Bond rally not yet a reason to pop the corks
Premature to expect any easing of the interest burden, because much of the government’s borrowing is long term
The sharp rally in SA government bonds since the general election has in an important sense been a vote of confidence in the new government of national unity (GNU). Foreign investors had been net sellers of our local currency bonds. Now they are coming back into the market. That’s helped to support a rally which is tangible evidence of what SA stands to gain if markets believe it can deliver better economic and fiscal outcomes.
With bond yields down by about 100 basis points from their pre-election highs, the government should in theory benefit from lower borrowing costs. So too should the private sector, whose longer-term borrowing tends to be priced off the government bond curve...
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