Bonds buoyed by short covering, rand

Johannesburg - South African bonds were up to eight basis points firmer in late trade on Wednesday, buoyed by a slightly firmer rand and some short covering.

Short covering activity is positive for prices as it means short sellers had to purchase securities to close out short sales.

By 15:50 the benchmark R157 bond was bid at 7.165 from 7.225% at its close on Monday. The benchmark R207 was bid at 7.865% from 7.920%, while the R186 was bid at 7.940% from 8.025%.

The rand was bid at R7.3293 to the dollar from R7.3700 at its previous close.

"Bonds are firmer on the back of some short covering, as well as rand strength," said a local trader.

On Wednesday, the Treasury announced it would auction R1.1bn worth of R203 bonds and R1.0bn worth of R207 bonds at its weekly auction on September 7.

Foreigners were net buyers of R1.686bn of South African bonds including repo transactions on Tuesday after net sales of R16.566m of local bonds on Monday, Bond Exchange of South Africa statistics show.

Nominal cumulative volume was R41.605bn on Tuesday from R10.984bn on Monday.

Foreigners were net buyers of R2.364bn of South African bonds excluding repo transactions on Tuesday after net sales of R122.929m of local bonds on Monday.

In the year to date foreigners have been net buyers of R69.108bn worth of local bonds, excluding repo transactions.

So far for total transactions, including repo transactions, foreigners have been net buyers of R61.833bn worth of bonds.

In 2009 foreigners were net buyers of R27.755bnworth of local bonds, excluding repo transactions, while for total transactions, including repo transactions, foreigners were net sellers of R2.424bn worth of bonds.