South African government bonds fell sharply on Friday, driving yields to their highest level in 7 months after central bank comments on rising inflation pressures dented prospects of interest rates cuts. The bond sell-off, a day after the Reserve Bank left its repo rate steady at 5.5 percent, weighed on the rand, pushing the currency to a near 8-week low against the dollar at one stage.
Stocks ended higher, snapping two days of declines as firmer commodity prices and upbeat global equities lifted sentiment, with technicals pointing to further gains. The yield on the benchmark 2015 bond soared to 7.905 percent, up 22.5 basis points from Thursday's close and reaching its highest level since early July 2010.
The yield on the longer-dated 2026 note rose as high as 8.835 percent, an 18 basis point gain on the day. Central bank Governor Gill Marcus's comments about monetary policy remaining stable for some time also showed in the forward rate agreement market, which suggested interest rates may rise 50 basis points to 6 percent in a year. The rand reached a session trough of 7.14 against the dollar, the softest it has been since November 29.