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Bond curve steepens on inflation worry

Aug 15 2012 13:05
I-Net Bridge
Johannesburg – The South African bond curve steepened in midday trade on Wednesday on inflation concerns.

“We have seen the long end steepen by around 8 basis points‚ which is a surprise given that is where foreigners tend to be buyers. I can only guess that the guys in the US are not seeing enough rain to break the drought that is driving global grain prices higher‚ or else recent data from the US and UK shows that those economies are doing better than currently priced in by the capital markets‚” a local trader said.

At 11:45‚ the benchmark R157 bond was trading at 5.675% from Tuesday’s close of 5.670% and Monday’s close of 5.660%‚ the R207 was bid at 6.735% and offered at 6.710% from its previous close of 6.680% and the R186 was trading at 7.560% from its previous close of 7.480%.

The National Treasury will auction R800m worth of R2023 bonds‚ R800m worth of R209 bonds and R500m worth of R2048 bonds on August 21.

UK unemployment fell for a fifth straight period in the three months to June‚ despite the recession‚ likely due to a boost in demand for staff in London‚ which was hosting the Olympic Games‚ data showed on Wednesday.

The Office for National Statistics (ONS) said the official‚ international measure of unemployment fell 46 000 in the three months to the end of June to total 2.56 million. That pushed the unemployment rate down to 8% from 8.1% in the three months to May.

The more timely claimant count measure of unemployment also fell in July‚ by 5 900‚ for a jobless rate of 4.9%.

That compared with a 1 000 increase and a rate of 4.9% in May.

The size of the drop was a surprise as economists surveyed by Dow Jones Newswires last week had forecast a rise of 7 000.

The ONS revised its claimant count estimate for June after originally reporting a rise of 6 100.

The data show unemployment in London fell 42 000 in the three months to June. That drop accounted for most of the total decline at a time when firms were probably adding to their staff levels in order to cope with the expected increase in demand due to the Olympics.

And‚ employment figures were also upbeat.

The number of employed people rose 201 000 in the three months to June. That was the biggest increase since May to July 2010 and lifted the total number of employed people to an almost four-year high of 29.5 million. The employment rate‚ meanwhile‚ fell to 71%‚ the lowest rate since March to May 2009.

Other figures show that the squeeze on consumers' pay packets continued in June‚ as while earnings have held steady‚ inflation actually accelerated in July to rise to 2.6%‚ up from 2.4% in June.

Average weekly earnings excluding bonuses‚ the measure which includes bonuses can cause steep fluctuations in monthly changes payments‚ rose 1.8% in the three months to June‚ unchanged from the May survey‚ the ONS said.

Including bonus payments‚ average earnings rose 1.6% in the three months to June.

Foreigners were net buyers of R833.853m of South African bonds including repo transactions on Tuesday after net sales of R827.382m of local bonds on Monday‚ data released by the JSE show.

Nominal cumulative volume was R208.829bn on Tuesday from R88.472bn on Monday.

Foreigners were net buyers of R1.104bn of local bonds excluding repo transactions on Tuesday after net sales of R1.073bn of local bonds on Monday.

For the year to date foreigners have been net buyers of R66.369bn of local bonds‚ excluding repo transactions. In 2011 they were net buyers of R47.359bn worth of local bonds‚ excluding repo transactions.

In the year to date foreigners have been net buyers of R67.746bn of local bonds including repo transactions. In 2011 they bought R37.501bn worth of local bonds.

bonds  |  market  |  jse



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