Bonds firmer as European Central Bank keeps rates unchanged

South African bonds edged firmer in the late afternoon on Thursday on rand gains after the European Central Bank (ECB) kept rates unchanged.

The ECB kept its main interest rate‚ the rate it charges on regular loans to banks‚ at a record low of 0.05%. The rate on overnight bank deposits also remained at minus 0.30%‚ meaning that banks pay the central bank to leave excess funds at the central bank.

European interest rates were left unchanged even though lower oil prices and concerns about China’s economy have raised deflationary concerns and threatened to derail the central bank’s efforts to bring inflation back to its target.

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The focus has now shifted to ECB president Mario Draghi’s news conference‚ where he is expected to provide further clarification on possible future stimulus measures to support growth and higher inflation.

At 3.43pm‚ the benchmark R186 was bid at 9.610% and offered at 9.605% from Wednesday’s close of 9.680%.

The middle-dated R207 was bid at 9.135% and offered at 9.125% from a close of 9.210% previously.

The rand was trading at R16.6287 from R16.7584 previously.