Bonds slightly firmer ahead of US inflation data release

South African bonds were slightly firmer on Friday morning as global markets awaited the release of US inflation data later in the afternoon.

US inflation is a key figure watched by Federal Reserve Bank officials in determining the pace of interest-rate increases.

A rise in interest rates could draw more investors back to investing in the US and spark an outflow of capital from emerging markets like SA.

Fed chairperson Janet Yellen took a cautious approach this week towards policy tightening and signalled that interest-rate increases would be gradual‚ provided inflation remained under control.

The Dow Jones Newswires reported that on Thursday Yellen said “we’re watching inflation very carefully in light of low readings. I think it is premature to conclude that the underlying inflation trend is falling well short of 2%. I haven’t reached such a conclusion.”

The Fed is concerned that inflation remains below its 2% target and would like to see it there in the coming months.

Rand Merchant analyst John Cairns said expectations were for a 0.2% month-on-month increase‚ which would take the year-on-year rate down to 1.7%.

At 9.01am the benchmark 10-year R186 was bid at 8.71% from Thursday’s 8.75%.

US 10-year Treasuries were bid at 2.3205% from 2.3412%.

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