Reserve Bank takes up R5.1 billion in government bonds in June


The SA Reserve Bank increased its holdings of government bonds at a slower pace in June, taking up R5.1bn through the bond buying programme launched to smooth the functioning of the local market and inject liquidity into the financial system.

The June purchases were roughly half of what was bought in May, and take its total holding of government bonds to R35.9bn since it announced the programme on March 25, data from the bank showed on Tuesday.

The Bank has not revealed a target for the purchases but has indicated that it will continue to make them until market dynamics have normalised.

The Bank was forced to intervene after government bonds came under pressure as investors fled to safe-haven assets amid Covid-19 related panic, causing bond yields to breach the 13% mark in late March.

Since the programme began, it is has increased holdings by R27.8bn.

Along with the bond purchases, the Bank has adopted other measures to support an economy hit by the effects of lockdown restrictions, including slashing interest rates to record lows of 3.75% and easing banking regulations to encourage banks to keep lending through the crisis.  

Ratings agency S&P Global’s primary credit analyst for South Africa, Ravi Bhatia, said in a recent interview that the programme should be seen in context of similar steps taken by central banks around the world.

“These are exceptional times,” said Bhatia. “As long as it does not deliver significant inflation and the programme remains broadly under control, we are not viewing it that detrimentally,” he said.

The Bank has, however, been under pressure to launch an explicit quantitative easing (QE) programme to help finance the government’s spending efforts during Covid-19. But it has maintained that QE is not appropriate for South Africa — as it still has space to deploy existing monetary policy tools to support the economy.


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