Forex and bonds Rand declines, yields hit four-year low

BONDS gained for a third day yesterday, driving yields to a four-year low, on bets developed economies will extend monetary stimulus, boosting demand for higher-yielding assets. The rand depreciated.

At 5pm, the rand was bid at R8.5907 to the dollar, 1.89c weaker than on Tuesday.

Yields on 10.5 percent bonds due December 2026 dropped.

Japan’s chief Cabinet Secretary Yoshihide Suga said the next Bank of Japan governor should support bold monetary easing, while the US Federal Reserve has pledged to leave interest rates low until the unemployment rate eases.

European Central Bank president Mario Draghi and his board meet today after data yesterday showed German industrial output rebounded less than expected in November.

“The rally in yields is clearly underpinned by the search for yield by offshore investors as the driving force in the local bond market,” Rand Merchant Bank’s head of bond trading Deon Kohlmeyer said.

Foreign investors bought R1.17 billion of South African debt on Tuesday, lifting purchases this year to R3.9bn, JSE data show.

South African vehicle sales expanded at the slowest pace in three years last year, the Na- tional Association of Automobile Manufacturers said yesterday, fuelling speculation the Reserve Bank may cut borrowing costs this year to boost growth.