In early 2014, the local bond market experienced another bout of weakness with investors getting uneasy with the higher levels of government borrowing and debt relative to economic growth. Yields have since drifted lower, with the R209(2036) government stock trading in a fairly narrow range of between 8.8% and 9.25% during the final quarter of 2014. Ratings agencies have mostly downgraded the credit risk ratings of SA bonds. Bigger counter-cyclical and infrastructure spending by government over the next few years will mean further pressure on the borrowing requirement as a percentage of GDP, which could spell further negative impacts on bond yields.
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