South Africa's government bonds, rand firm on Greek bailout approval

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South Africa’s government bonds firmed on Thursday after Greece’s parliament approved a bailout plan and Federal Reserve Chair Janet Yellen reinforced expectations for a U.S. rate hike.

At 1423 GMT, the yield on the benchmark 2026 issue was down 10.5 basis points at 8.06 percent.

“Janet Yellen’s comments and parliament accepting the proposal in Greece were quite positive for our bonds. It’s still not very liquid but it is kind of gapping lower on the good news

out of Europe,” said Alexa Nicolau, a fixed income specialist at Rand Merchant Bank.

The positive sentiment also helped the rand, which firmed 0.43 percent against the dollar to 12.3660 compared to its New York closing level on Wednesday.

The currency had lost ground the previous session as expectations of a rise in U.S. interest rates drove the dollar higher across the board.

On the local front, investors will now shift focus to consumer inflation data and the central bank decision on interest rates due out next week.

The South African Reserve Bank (SARB) has kept lending rates unchanged at 5.75 percent since July 2014, but looks likely to lift them as the economy continues to struggle.

“The SARB will be mindful of the current stagflation dilemma, but will likely hike local interest rates should the Fed initiate a hike at the September policy meeting,” Nedbank analysts said in a note to clients.

 

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