a higher “term premium” – rather than changes in actual expectations of future policy rates. It was indeed striking to see how strong the correlation had become, during the taper tantrum episode, between the longer ends of government yield curves in South Africa and the United States, and this, despite the meaningful differences in economic and policy fundamentals between the two countries.
The depth of domestic capital markets, which were able to absorb significant net sales of SA bonds by non-residents (R68 billion from the beginning of May 2013 up to the end of last week, according to JSE data) also played a part.