Improved investor confidence following the Reserve Bank's latest policy decision has provided support for South African bonds, but renewed Middle East tensions continue to cloud the outlook.
South Africa's bond market has regained some stability following the South African Reserve Bank's decision to leave interest rates unchanged, although renewed geopolitical tensions in the Middle East and the United States Federal Reserve's policy decision continue to weigh on investor sentiment.
Investec chief economist Annabel Bishop said South African bond yields experienced significant volatility during July after escalating conflict in the Middle East prompted investors to retreat from emerging market assets.
"South Africa's bond yields have risen this month, jumping on the worsening of the Middle East crisis mid month, with the ten year benchmark bond yield rising from 8.32% at the start of the second week of July to 8.93%," Bishop said.
She noted that market conditions improved after last week's Monetary Policy Committee (MPC) decision.
