* Bonds gain as CPI dents case for rate hike
* Rand tracks other commodity currencies weaker
JOHANNESBURG, March 22 (Reuters) – South Africa’s government
bonds rallied on Thursday after domestic inflation surprised the
market to the downside, backing the case that the Reserve Bank
might not have to increase interest rates after all this year.
The rand extended losses against the dollar, however, and
was also weaker versus the euro, partly on dented prospects for
higher rates and also in tandem with weaker commodity currencies
elsewhere as worries about the global economy resurfaced.
The yield on the benchmark three-year bond closed
five basis points lower on the day at 6.89 percent.
It was at 6.97 percent just before Statistics South Africa
reported that CPI braked unexpectedly to 6.1 percent
year-on-year in February from 6.3 percent in January.
The yield on the longer-dated 2026 issue fell
three basis points to 8.515 percent.
“The CPI data was a reprieve for the market. I don’t see the
market rallying too much further but it’s comforting knowing
that inflation isn’t rocketing like some people anticipated.
It’s given the market a bit of a pause and some breathing
space,” said Steve Arnold, a bond trader at Investec.
Government bond prices have sold off sharply over the past
week, pushing yields to their highest levels since mid-December,
as the market saw it as highly likely the Reserve Bank would
resume monetary tightening by year end to curb inflation.
Continued…
