Downgrade Risks Abound As Moody's & S&P Reviews Loom

• SA local curve seen bull flattening again after a volatile session around yesterday's SARB saw front-end rates reprice higher.
• 10Y yields take out key support at 8.80 (-2.0bp), while 30Y yields hold marginally below the 11.00 handle (-5bp).
• USD/ZAR saw a muted reaction to yesterday's SARB meeting, tracking broad USD sentiment instead as the central bank kept rates on hold at 3.50% with a 3/2 split.
• A persistent split may be of some concert going into 1Q21 with short-term inflation risks "to the downside" - opening up scope for a more dovish revision to the SARB's perceivably hawkish stance, but will remain data dependent.
• USD/ZAR remains rangebound for now, at the mercy of USD-side moves with the DXY trading around 92.20 support. A push towards 92.00 should support more USD/ZAR downside towards 15.20.
• However, the 92.00 level has proven to be a significant hurdle and will take some momentum to overcome. Positive RSI divergence on the 15m timeframe supporting early upside pressures in DXY.

Local news

• Moody's & S&P to review SA's credit rating: Bloomberg notes 12/23 surveyed expect S&P to reduce SA's credit outlook from stable to negative, while most see Moody's keeping its assessment the same.
• Standard Bank warns further downgrades would see upside revisions to SA's estimated debt servicing costs that are already forecast to rise 16.1% on average over the next 3 years. Feb budget remains a key focal point for agencies on the credibility of SA's fiscal consolidation prospects - Fin24
• SABC suspends its retrenchment process for a further 7 days for stakeholders to discuss issues further as union pressure and strike action weighs on the decision. Unions say failure to withdraw the retrenchment notices rings hollow - Business tech. Strike action most likely to continue today.