Bonds extend gains on rand

Johannesburg - South African bonds were 12 basis points firmer on Tuesday on a combination of a well-bid auction, short covering and a firmer rand during the afternoon session.

By 15:45 the short-term government R153 bond was at 9.430% from its previous close of 9.540%. The medium-term R157 was at 8.870% from 8.970% at Monday's close, and the long-term R186 was bid at 8.535% from 8.660% before.

The rand was last at R9.8791 per dollar from a previous close of R10.0170 and off an intraday worst of R10.0677.

Bonds opened firmer as some short covering emerged after the Australian central bank cut interest rates by 75 basis points, leading some to believe that local interest rates might also come down, a trader said.

The South African Reserve Bank's Monetary Policy Review will be released at 17:30 and will be monitored for any hints on inflation and what can be expected come December 11 on interest rates.

The longer end of the bond market strengthened after the auction, a trader noted. The South African Treasury on Tuesday allotted R750m worth of R204 bonds at a clearing yield of 8.900%. It allocated R200m worth of R209 bonds at a clearing yield of 8.110%.

Initially bonds had ignored the weaker rand during the morning session, but the currency staged a strong recovery during the afternoon session, moving below the R9.90 per dollar level.

Foreigners were net sellers of R183.621m worth of South African bonds on Monday after net sales of R499.784m worth of local bonds on Friday, Bond Exchange of South Africa statistics show.

Nominal cumulative volume was R39.778m on Monday from R40.953bn on Friday.

- I-Net Bridge