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Falling oil boosts SA bonds

Yields on benchmark government bonds fell 12.5 basis points to 7.84 percent.

FILE: South African government bonds gained on Wednesday as investors bet that a slump in global oil prices could lead to benign inflation and steady interest rates in Africa's most advanced economy. Picture: Supplied.

JOHANNESBURG - South African government bonds gained on Wednesday as investors bet that a slump in global oil prices could lead to benign inflation and steady interest rates in Africa's most advanced economy.

Yields on benchmark government bonds fell 12.5 basis points to 7.84 percent, breaking through technical barriers to trade at a month low as crude prices came under pressure because of worries about oversupply.

"Oil staying quite low is good for emerging markets that are importers, from a CPI point of view," a bond trader in Johannesburg said.

"The R186 has broken some technical levels; we had a level at 7.92. Now the next level is 7.84 and then 7.80."

The R186 benchmark last traded at 7.80 percent on Oct. 31 when it hit its lowest in a year.

The rand firmed 0.4 percent to 11.1735 against a weaker dollar.

The local unit will have to break through 11.16 hit on Monday, before it tries for last week's 11.11 area.

Earlier in the session, South Africa released better-than-expected retail sales figures for September, with growth expanding 2.3 percent from 2 percent in August. However, the number was coming off a low base as sales contracted 0.1 percent the same month last year.

"September 2014's outcome adjusted for the statistical boost is a weak 0.1 percent year-on-year," said Annabel Bishop, an economist at Investec, saying strikes last year had hit spending.

South African households battling high debt levels, rising interest rates and tighter lending criteria bodes ill for the sector's contribution to economic growth.