SA’s weekly sale of government paper drew strong demand, especially for shorter-dated bonds, as a weak global economy led investors to anticipate domestic interest rates staying lower for longer than previously expected.

The yield spread between SA’s two most liquid government bonds hit a record high this week as investors buy more at the shorter end of the curve on deferred expectations for interest rates hikes. For the year to date, foreigners have been net buyers of R49.537-billion worth of local bonds. In 2010 foreigners bought a net R57.064-billion worth of local bonds.