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Investors in SA bonds have had reason to smile so far this year. They backed what has been SA’s best-performing asset class by far. To mid-April the JSE all bond index romped home to deliver a total return of 7.5%. It comfortably beat the JSE all share index, which registered a 4% decline, and trounced the listed property sector, where prices slumped by 15%. Investing in a money market fund would have produced a return of about 2%. For bond market investors it has been a far cry from the situation they were facing as recently as November last year, following the gloom-and-doom medium-term budget policy statement (MTBS) delivered by former finance minister Malusi Gigaba on October 25. His speech sent a shock wave through the bond market, which reacted by driving the yield on the key R186 10-year government bond from a close of 8.8% the day before to a high of 9.44% just two days later. It was the R186’s highest yield in two years.It is important to remember that when bond yields rise...

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