Johannesburg - South Africa's government bonds extended the previous day's gains on Friday, pulling yields to 1-1/2 week lows as market players bet on rates staying at multi-decade lows for some time after a dovish central bank policy statement.
The rand gained as much as 1 percent against the dollar, partly tracking a stronger euro, although lingering labour unrest in the mining sector could come back to haunt the local currency.
The yield on the three year benchmark fell four basis points to end the week at 5.37 percent while the longer-dated 2026 issues was down eight basis points at 7.445 percent.
“There's been reasonably good buying of the back end-bonds - generally the market is reading that the monetary policy committee speech was more dovish than expected yesterday,” said Mark Southworth, a bond trader at Citi.
“U.S. Treasuries are also stronger, so we're following them and the dovish-ness of the central bank Governor yesterday means that people like the 10-year area and longer.”
The Reserve Bank kept interest rates on hold as expected on Thursday but was downbeat on domestic growth prospects, prompting some traders to price in the chance of a rate cut in November.
The rand hit a session high of 8.2271 to the dollar, and was at 8.2460 by 1611, up 0.83 percent from Thursday's close.
Analysts said the currency was enjoying a reprieve following resolution of a dragged-out wage dispute at Lonmin that had weighed on sentiment in recent weeks, but that this might be temporary as wage-related strikes spread to other mining firms.
South Africa's financial markets will be closed on Monday for the Heritage Day public holiday. - Reuters