Yields fall while rand tracks weak euro

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.”