Johannesburg - Yields on short-dated South African bonds fell to session lows on Monday after South African Reserve Bank governor Gill Marcus dampened hopes of steep rate hikes.
In an interview with Reuters, Marcus said money market expectations of a 200 basis point rate increase this year were exaggerated.
Forward Rate Agreements (FRAs), which give an indication of rate move expectations by the market, were pricing in a chance the reserve bank would raise the repo rate further this year, after a 50 basis point hike to 5.5% last week.
The yield on the 2015 bond a benchmark for the front end of the government yield curve, dropped 15 basis points to a session low of 7.255% after the comments, while the rand weakened.
"There's demand for the very short-dated R157's because they've been a tad bit oversold. The market has been pricing in chances of about 200 basis point hikes this year, which she says have been exaggerated," said Steve Arnold, a bond trader at Investec.
The rand fell over 1% to R11.2545/$.
"The rand comes under pressure because it was pricing in further hikes down the road; some of our peers are going to be hiking rates further than we will be," Investec's Arnold added.
South Africa joined its emerging market peers when it hiked the repo rate last week, however the market viewed the move as too little, punishing the rand by selling it to its weakest in over five years.
In an interview with Reuters, Marcus said money market expectations of a 200 basis point rate increase this year were exaggerated.
Forward Rate Agreements (FRAs), which give an indication of rate move expectations by the market, were pricing in a chance the reserve bank would raise the repo rate further this year, after a 50 basis point hike to 5.5% last week.
The yield on the 2015 bond a benchmark for the front end of the government yield curve, dropped 15 basis points to a session low of 7.255% after the comments, while the rand weakened.
"There's demand for the very short-dated R157's because they've been a tad bit oversold. The market has been pricing in chances of about 200 basis point hikes this year, which she says have been exaggerated," said Steve Arnold, a bond trader at Investec.
The rand fell over 1% to R11.2545/$.
"The rand comes under pressure because it was pricing in further hikes down the road; some of our peers are going to be hiking rates further than we will be," Investec's Arnold added.
South Africa joined its emerging market peers when it hiked the repo rate last week, however the market viewed the move as too little, punishing the rand by selling it to its weakest in over five years.