Bond market boring? No, rather scary ...
Looming financial storms are likely to hit the interest payment bill, already government’s second-biggest expense
Let’s be honest — when it comes to investing, bonds just ain’t the sexiest things. They are, however, an asset class with a major bearing on the SA economy. One significant influence is on the rand. When SA bonds are in favour with foreign investors, they pump billions into the economy, to the benefit of the exchange rate. The reverse occurs when SA bonds fall from favour, sometimes with very painful consequences for the rand and, ultimately, for inflation. If you’re a taxpayer you should be concerned with bond yields. They foot the interest payment bill, the second-largest cost to government after education. And the bill is rising fast. From R146.3bn in the past fiscal year, it is forecast by treasury to rise 11% to R162.4bn in the current year. Lest we forget, bonds make up a large portion of the average pension fund. Things started off well for the bond market and the rand this year. The key R186 10-year government bond yield fell to its lowest level since October 2015 and the ra...
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