Bonds firm after Sarb comments

2012-10-02 18:52

Johannesburg – The South African bond market firmed in afternoon trade on Tuesday after South African Reserve Bank (Sarb) governor Gill Marcus said policy makers should “adjust the policy stance”.

“The speculation that the Sarb will follow the lead of the Reserve Bank of Australia in cutting rates has gained momentum after the governor’s comments‚” a local bond trader said.

At 15:52‚ the benchmark R157 bond was trading at 5.340% from 5.440% at Monday’s close and 5.370% at Friday’s close. The R207 was bid at 6.415% and offered at 6.385% from its previous close of 6.505%‚ and the R186 was trading at 7.490% from 7.555% at its previous close.

The rand was bid at R8.3457/$ from its previous close of R8.3556.

Dow Jones Newswires reported that the Reserve Bank of Australia cut interest rates for the first time since June‚ reacting to declines in key commodity prices and mounting evidence that the country's mining investment boom was fading.

South African policy makers should develop policies and regulations that will help SA better absorb the shocks of the global economic slowdown‚ Marcus told a business function on Tuesday.

Marcus said the spillovers of the global economic slowdown on SA were “profound” and needed to be addressed in order to improve confidence levels in the country.

The monetary policy committee's decision to keep interest rates unchanged at current levels last month “was not an easy one” given the deteriorating global economic outlook.

She noted that the domestic economic outlook was “beset” by its own challenges‚ some of which were caused by the global as well as local economic slowdown.

Analysts have cautioned that the current strikes in some sectors of the economy as well as steep wage increases could lead to job losses and constrain new job creation by companies.

* Follow Fin24 on TwitterFacebookGoogle+ and Pinterest.