With the rand holding steady at R11.92 on the morning of Thursday, 25 January, there are continued talks around how much further the currency and economy could strengthen heading into the end of 2018.<\/p>\n
According to a report by Reuters<\/a><\/strong>, South African bonds have become a top 2018 trade with investors backed by\u00a0a strengthening currency, some of the highest inflation-adjusted yields in emerging markets and now the possible exit of unpopular president Jacob Zuma.<\/p>\n Yields on the benchmark 10-year bond are down more than 100 basis points from late-November peaks, with more positive factors expected to be added to the mix including an expected removal of Zuma and a prudent 21 February budget by finance minister Malusi Gigaba.<\/p>\n That may in turn dissuade Moody\u2019s from cutting South Africa\u2019s last remaining investment-grade credit rating, Reuters said.<\/p>\n “Second, the central bank predicted recently inflation would fall below 3 percent, the midpoint of its target band. While December\u2019s rate quickened to 4.7%, the rand\u2019s strength since end-November should moderate it from now,” it said.<\/p>\n “That offers bondholders above 4 percentage points in \u201creal\u201d yield, less than Russia or Brazil but well above what they can get in India, Mexico, Poland or Turkey. And with the rand strong, it also means interest rate cuts are on the way.”<\/p>\n