PRETORIA (Reuters) - South Africa's Reserve Bank said rising inflationary pressure caused by a weaker rand, a wide current account deficit and relatively high funding needs could weigh on government bond yields.
Should the global economy improve, appetite for emerging market bonds was expected to drop, hurting the long end of the yield curve, the bank said in its annual Financial Stability Review released on Thursday.
South African bonds have traded near record highs in recent days, supported by signs of weak global growth that could cause investors to shift money into higher yielding emerging markets.
Domestic financial institutions have raised their holdings in government debt, the report also said.
Banks increased their investment by nearly 19 percent to 185.4 billion rand in the year to January 2013. The insurance industry added over 20 percent to 161.9 billion rand in the third quarter of 2012.
Source: http://news.yahoo.com/african-c-bank-says-inflation-funding-needs-weigh-080717107--finance.html
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