SA bonds track U.S. Treasuries firmer

JOHANNESBURG (Reuters) – South African government bonds rallied to their firmest in a month and the rand held near 3-week highs on Thursday as emerging markets took hope that the U.S. Federal Reserve would not be hiking interest rates as soon as previously expected.

The market interpreted minutes released on Wednesday night of the Fed's last meeting as indicative of continued accommodative monetary policy, suggesting high-yielding emerging market assets would still be in demand for investors.

Domestic bonds tracked U.S. Treasuries, and the benchmark 2026 yield dropped 8.5 basis points to 8.065 percent, its lowest since Sept. 8.

The rand held near 3-week highs around 11.0300 against the dollar.

Analysts said the unit was likely to stabilise after strengthening this week from an 8-month low. If it manages to firm past 11.0300, it could break through the psychologically important 11 barrier before finding resistance at the 10.9890 high from Sept. 19.

Domestic focus will be on industrial output data expected later in the session. Mining production, due at 0930 GMT, is expected to have continued contracting in August, although not as much as July.

Manufacturing, the second biggest sector in the economy, is also expected to recover from a nearly 8 percent contraction in July. Economists have forecast a 3.2 percent shrinkage in August.