SOUTH African bonds were flat in midday trade on Wednesday having weakened slightly earlier in the session after worse than expected consumer inflation data for February.

Inflation, as measured by the consumer price index (CPI) was at 7% year on year in February from 6.2% year on year in January, its fastest pace of acceleration since June 2009.

A reading of 6.8% or 6.9% for February had been expected.

In general, when inflation is on the rise, bond prices fall. Rising inflation erodes the purchasing power of what traders will earn on their investments.

Investec economist Kamilla Kaplan said that the South African Reserve Bank was expecting CPI inflation to breach the 3-6% target range this year, at an average of 6.6%.

"Taking into account the Reserve Bank’s inflation forecast and the hawkish policy bent, the repo rate is likely to rise further this year in order to keep real interest rates in positive territory.

"We expect a further 50 basis points increase in the repo rate in July followed by a 25 basis points rise in September," Kaplan said on Wednesday.

At 11.40am, the benchmark R186 bond was bid at 9.310% and offered at 9.290% from Tuesday’s close of 9.310%.

The middle-dated R207 was bid at 8.790% and offered at 8.780% from a previous close of 8.800%.