LO­CAL BOND YIELDS TO TRACK US WHEN WASH­ING­TON DC GETS BACK TO BUSI­NESS

Finweek English Edition - - INVESTMENT -

Fol­low­ing the Ber­nanke speech in May 2013, lo­cal bond yields tracked US yields higher; how­ever, by end of Au­gust lo­cal yields fell, while the US’s moved higher. This pat­tern was bro­ken when the US en­tered a stale­mate on its Fed­eral Bud­get ap­pro­pri­a­tions and the US Trea­sury Bonds be­came a safe haven for risk averse in­vestors. Ac­cord­ing to Pro­fes­sor Brian Kan­tor, chief econ­o­mist at In­vestec, US rates de­cline while what are re­garded as more risky des­ti­na­tions for cap­i­tal (i.e. emerg­ing mar­kets) be­come less at­trac­tive, re­sult­ing in a weaker rand, higher long-term in­ter­est rates and a weaker JSE. “One should ex­pect RSA yields to fol­low US yields and for the rand/US dol­lar ex­change rate to move in the op­po­site di­rec­tion, once Wash­ing­ton DC gets back to busi­ness as usual.”

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