Yields fall while rand tracks weak euro

The Star Early Edition - - MARKETS -

GOV­ERN­MENT bonds traded near a high yes­ter­day, buoyed by the fall­ing global price of oil which is help­ing to tem­per in­fla­tion ex­pec­ta­tions.

The yield on bench­mark 2026 bonds fell, near­ing the 2014 low hit last Fri­day, as lower crude prices sig­nalled be­nign in­fla­tion.

Of­fi­cial data showed fac­tory gate prices mod­er­ated in Oc­to­ber, also bod­ing well for con­sumer in­fla­tion and steady in­ter­est rates.

The rand weak­ened, track­ing a euro pres­sured by soft Ger­man in­fla­tion data. It was bid at R10.9758 to the dol­lar at 5pm, 1.14c weaker than the same time on Wed­nes­day.

“The re­cent de­cline in oil prices and less vo­latil­ity in the rand ex­change rate will support a more mod­er­ate level of PPI (pro­ducer price in­dex) in­fla­tion over the next three to six months,” Christie Viljoen at re­search house NKC said.

Mar­ket play­ers said the data would prob­a­bly con­vince the SA Re­serve Bank that there was no im­me­di­ate pres­sure to hike in­ter­est rates.

Viljoen added: “How­ever, pol­i­cy­mak­ers will not be able to wait much longer than the mid­dle of next year, with the US [Fed­eral Re­serve] ex­pected to lift its in­ter­est rates in the sec­ond half… South Africa needs higher in­ter­est rates to com­pete for in­vest­ment flows.”

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