* Rand, govt bonds supported by risk-rally ahead of FOMC
* Inflation likely moderated in May
JOHANNESBURG, June 20 (Reuters) – South Africa’s rand hit a
month high against the dollar on Wednesday after breaking
through a resistance level, and government bonds gained as
markets expected further monetary stimulus out of the U.S.
Federal Reserve.
Bonds were also buoyed by expectations that May inflation
will have eased back into the central bank’s 3-6 percent target
in May due to a drop in fuel prices.
The 2015 bond yield was down 2.5 basis points at a
new record low of 6.025 percent while the 2026 paper
dropped four basis points to 7.985 percent.
Economists have forecast annual inflation at 5.95 percent
from 6.1 percent in April, while on a monthly basis prices are
expected to have stayed the same in the two months. The data is
due at 0800 GMT.
Longer bonds have been outperforming the shorter end of the
yield curve in the past few sessions after a three-week rally of
the short-dated stock. Dealers say the front end now looks too
expensive and yields maybe rallied too fast and too quickly. The
R186/R157 spread was retracing its peak from last week.
The spread was at 196 basis points and the break through 200
basis points opens up 185 basis points, technical analysts say.
The rand was up 0.2 percent at 8.1849 to the dollar
at 0630 GMT, from a 8.20 close in New York on Tuesday.
Continued…
