The Macro Chart Book
Technical factors have driven US treasuries lower, while lower South African inflation and a peak in the total risk premium signals potential bond market gains for South African investors. On the credit side, Eskom remains a worry.
The strategy of buying financial assets that will offer a sure loss if held to maturity, originally initiated by actions of central banks, is now a prevalent market phenomenon.
US/China trade war continues to have an impact on bond yields, while Chinese authorities are under pressure to maintain the currency to protect the local economy and avoid a global shock. Core inflation has declined significantly and on the credit side issuance has fallen in May.
The local credit market has been booming this year and, following a quiet 2018, demand for inflation-linked bonds is also on the rise. The increased demand for these bonds also contributed to an increase in the breakeven inflation rate.
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