Bond market soars after Mboweni comments

The bond market rose sharply this morning due to comments by Reserve Bank governor Tito Mboweni over the inflation and interest rate outlook. Dealers say that the bond market - a major indication of foreign investor sentiment - was under pressure after Mboweni said yesterday that the inflation outlook had deteriorated.

Analysts say movements on the bond market indicated that investors were now expecting at least a 50 basis point rate hike in June. Despite the soaring cost of living, the South African Reserve Bank says the inflation target policy has not failed.

According to the latest Monetary Policy Review the successes or the failures of the inflation targeting depends on whether the bank finally achieves its mandate by bringing the economy to a low and stable inflation environment over time.