Picture: INVESTORS MONTHLY
Picture: INVESTORS MONTHLY

LOCAL bond yields were lower on Friday morning ahead of the weekly inflation-linked (linker) bond auction.

At Friday’s auction, the Treasury will be looking to place R650m of the I2033, I2046 and I2050.

At 8.41am, the benchmark R186 bond was bid at 9.135% and offered at 9.120% from a previous close of 9.160%.

The middle-dated R207 was bid at 8.615% and offered at 8.625% from Thursday’s close of 8.640%.

The South African Reserve Bank on Thursday increased the repo rate by 25 basis points to 7%, despite a downward revision to its economic growth and inflation outlooks.

The weak rand and rising food prices remained concerns and were the main reasons behind the rate hike, which comes after a 50 basis point hike in January.

Despite an improvement in the Bank’s inflation outlook, rising food prices could stoke inflation higher than expected.

"A more protracted drought, combined with a weaker exchange rate and restocking of herds, may keep food inflation elevated for a longer period than currently forecast," Reserve Bank governor Lesetja Kganyago said. Oil rising from about $40 a barrel would drive up inflation, the Bank said.

The six-member monetary policy committee was split evenly between a hike and leaving the rate unchanged, and only after "further deliberations" settled on a 25 basis point increase.

Elsewhere, bonds in Europe could make some ground with equities expected to take a breather Dow Jones Newswires said.

A price rally in the US government debt market tapered off on Thursday as investors took some chips off the table following the Federal Reserve indicating in a previous session that interest rates would be hiked slowly, the newswire said.

After falling to 1.854% earlier on Thursday, the yield on the benchmark 10-year treasury note settled at 1.903%, compared with 1.940% on Wednesday.