South African bonds were slightly stronger late on Thursday after the Reserve Bank raised the repo rate 50 basis points to 6.75%‚ due to concerns about rising inflation and continued weakness in the rand.
At 3.36pm‚ the benchmark R186 was bid at 9.530% and offered at 9.560% from Wednesday’s close of 9.600%.
The middle-dated R207 was bid at 9.035% and offered at 9.040% from Wednesday’s close of 9.070%.
"The decision by the Reserve Bank’s monetary policy committee to hike the repo rate 50 basis points‚ taking it to 6.75% from 6.25% and the base home loan rate beyond the 10% barrier to 10.25% from 9.75%‚ comes as no surprise‚" said Seeff chairman Samuel Seeff.
By now consumers should also be aware that this was the first of more hikes to follow‚ he said.
He said interest rates could rise as much as 1-3 percentage points this year‚ especially in the event of a credit downgrade to junk status.
Although not good news for consumers‚ it did send a strong message to the international ratings agencies and investors that the Reserve Bank was serious about curbing inflation and protecting the value of the rand‚ Mr Seeff said.
TMG Digital/BDlive
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