Bonds inch towards the year’s low

YIELDS on the benchmark bonds fell towards the year’s low yesterday as lower global oil prices improve prospects of benign inflation, while the rand gained on a weaker dollar.

Brent crude dropped towards $77 (R846) a barrel after Iran signalled that the Organisation of the Petroleum Exporting Countries was unlikely to push for a major change in oil output despite the falling prices.

The yield on the 2026 government bond dropped to levels last tested on Friday.

“South Africa is visibly benefiting from the rapid decline noted in international oil prices in recent months,” Tradition Analytics said in a market note.

“The rand price of brent crude has declined by over 30 percent from its recent peaks in June. This bodes well for the inflation outlook into year-end, as such a steep decline in the fuel price will trim 0.35 percentage points off the year-on- year headline CPI [consumer price index] growth rate,” Tradition said.

The rand firmed after US data suggested economic growth in the world’s powerhouse could be slowing towards year-end.

At 5pm the rand was bid at R10.9644 to the dollar, less than a cent weaker than at the same time on Tuesday.