The South African bond market was mixed on Wednesday before midday, with the benchmark bond stronger after headline consumer inflation came in better than expected. Statistics SA reported that the annual inflation rate for April was 5.3%, compared to the corresponding annual rate of 6.1% in March. The market had expected inflation for April to fall between 5.4% and 5.6%. Generally, there is an inverse relationship between inflation and bond prices. If inflation decreases, bond prices rise because rising inflation erodes the purchasing power of what an investment will earn. Rand Merchant Bank analyst had said Gordon Kerr said any inflation figure lower than the forecasted 5.6% should provide further support for bonds, which had closed below the key 8.58% level, an area they had failed to rally through a week ago. At 11.35am, the bid on the benchmark R186 was at 8.48% from Tuesday’s 8.56%. However, the R207 was at 7.475% from 7.39%.
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