South African bond yields crept up on Tuesday in a knee-jerk response to a faster-than-expected rise in October consumer inflation but most analysts still do not expect another interest rate hike in 2002.
The yield on the key R153 bond crept up three basis points to 11,15% on the data but then slipped to 11,09% to be nine basis points firmer on the day as the market took the data in stride.
The short-dated R150, due 2005, was bid at 11,67% from 11,695% on Monday.
South Africa’s targeted CPIX inflation measure rose by 12,5% in the year to October, above expectations, compared to 11,8% in September.
Analysts polled by Reuters had forecast CPIX — which strips out home loans — rising by an annual 12,2% in October. CPIX annual growth has now risen outside its official three to six percent target range for the 12th consecutive month.
”I don’t think it changes in any way the interest rate outlook,” said Standard Bank economist Monica Ambrosi.
”We are all expecting the peak (in consumer inflation) to be here, and that being the case the outlook is still that in the new year inflation will start coming down, and we could be looking at a rate cut in June,” she said.
Following recent dovish statements by Finance Minister Trevor Manuel and central bank governor Tito Mboweni, economists believe that the risk of a fifth interest rate hike at the November 27 and 28 policy meeting has diminished.
The rand extended gains on the day but traders said it was more flow-driven than a reaction to the inflation numbers.
At 0950 GMT, the rand was trading at 9,5550 to the dollar after firming to 9,5350 on Monday, its best level since November last year. It closed at 9,6140 in overnight trade. – Reuters