* Bonds gain on lower global, domestic inflation
* Rand reverses gains on EU scepticism
JOHANNESBURG, June 27 (Reuters) – South African government
bond yields rallied towards all-time lows on Wednesday as global
consumer inflation showed signs of easing, raising prospects of
further monetary easing.
Yields on the government’s 3-year benchmark and the longer
dated 14-year paper dipped five basis points to 6.02 percent and
8.015 percent respectively, bringing them closer to historic
lows.
“The prospects of even lower rates in the core markets
meaning the U.S. and Europe are extremely high, so the value
preposition in investing in rand rates is definitely strong,”
said Luis Costa, head of CEEMEA FX and debt strategy at Citi.
Last week local consumer inflation slowed in May, returning
to the central bank’s 3-6 percent target range at 5.7 percent
year-on-year and raising expectations the central bank may have
room to cut interest rates further which are already at
three-decade lows.
With inflation moderating while interest rates are close to
zero in the developed world, investors would take a liking to
South African bonds even if a cut to a 5.5 repo rate percent was
imminent.
The rand gave up earlier gains to trade flat at 8.42 against
the dollar by 1630 GMT. It was weighed by pessimism about the
prospect of a European summit resolving the debt woes of the
region, which is South Africa’s largest trading partner.
“We have quite a significant event risk coming up this
week,” said Sean McCalgan, market analyst at ETM, referring to
the Europe summit.
(Reporting by Vuyani Ndaba; Editing by Ed Stoddard)
© Thomson Reuters 2012 All rights reserved
