"Bond yields are predicting an increase in interest rates, which is negative for the property sector‚" Consilium Securities senior equities trader Rob Towell said.
According to RMB‚ the Forward Rate Agreement market has now priced in an 80% chance of a 50-basis points hike in interest rates after the November Monetary Policy Committee's meeting‚ with a small probability priced in for a hike next month.
"Whether interest rates move higher is a question people are asking given that growth is so low‚" Towell said
Since the beginning of May‚ the yield on the local R186 bond has risen 30% while US treasury's yield touched a fresh two-year high after the US Federal Reserve (Fed) delivered its minutes, which showed that the tapering of US stimulus before the end of the year was still a possibility.
"The Fed was not conclusive about how they were going to do it‚ but consensus is that tapering will kick off this year‚ which will see more pressure on emerging market yields‚" he said.
Shares of SA's largest listed property company Growthpoint fell 1.72% to R22.80‚ a near two-month low‚ with Redefine‚ the second-biggest property group on the JSE‚ dropping 2.02%‚ close to its worst level since May last year.
Vukile Property Fund gave up 3% marking the biggest percentage drop in the sector‚ with Investec Property Fund losing 2.74%‚ Hyprop shedding 2.18% and Fountainhead falling by 1.40%.
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