Picture: THINKSTOCK
Picture: THINKSTOCK

LOCAL bond yields trended higher on Tuesday morning as traders awaited the release of South African inflation data on Wednesday.

Inflation, as measured by the consumer price index (CPI), is expected to track higher in February from 6.2% year on year in January.

"The Reserve Bank projects significantly higher inflation both this year and next, relative to our own forecasts, as evidenced by their recent forecasts in the March monetary policy committee statement," said Investec economist Kamilla Kaplan.

"Given that the Bank raised interest rates in March, instead of our forecast of May, we now do not expect a hike in May. However, our previous forecast of a 50 basis point increase in November has been pulled forward to July. There is also now the possibility of an additional 25 basis point increase occurring in September," Ms Kaplan said.

At 8.36am, the benchmark R186 bond was bid at 9.250% and offered at 9.230% from a Friday close of 9.160%.

The middle-dated R207 was bid and offered at 8.730% from a previous close of 8.640%.

European bonds were likely to open unchanged as equities were set to remain flat, Dow Jones Newswires said.

US government bonds pulled back on Monday as investors continued to mull statements from Federal Reserve officials after the central bank signalled last week that it would not raise interest rates as quickly as previously expected.

The yield on the benchmark 10-year treasury note closed at 1.921% on Monday, compared with 1.871% on Friday.

Atlanta Fed president Dennis Lockhart and San Francisco Fed president John Williams "went out of their way to talk about April, it seems", said Credit Agricole’s global head of interest-rates strategy, David Keeble. "I think we had almost completely priced out April, and now we just have to rethink it a little bit," Mr Keeble said.