The central banks of the world are creating what will ultimately be the most devastating bubble of all: a global government bond/debt bubble.

Interest rates on offer in developed economies, Switzerland, Germany, UK, France, the US are at or below 0%, which means investors are looking elsewhere to earn returns, which is where emerging economies such as SA comes in, and is why local interest rates could still go lower from here.

The JSE All Bond Index has rallied very strongly in recent months, which is why local interest rates have fallen so much (long-term bond rates by nearly 100bps in the past several weeks), and why the SARB was prompted into cutting interest rates again.

The Reserve Bank has two options as this trend is reinforced and extends for the coming 5-10 years: 1) let the Rand strengthen to counter the effects that foreign inflows have on the economy, or 2) print up more Rands and cut interest rates to prevent the Rand from strengthening further.

So far, indications are they will choose the latter route, and this means that credit extension could ramp much higher, fueling another major business cycle boom in the next 5-10 years.