Bonds firm despite softer rand

By 08:45 the short-term government R153 bond was at 9.140% from its previous close of 9.190%. The medium-term R157 was at 8.625% from 8.690% at Wednesday's close and the long-term R186 was bid at 8.350% from 8.390% before.

The rand was last at R9.8249 per dollar from a previous close of R9.7950.

A local bond trader said bonds, which had firmed yesterday on the stronger rand, were shrugging off currency weakness today and stayed firm.

"It's a very thin market. The economic news and the fall in global equities are good news for bonds - bonds are attracting the flows," he added.

The main even for the markets today will be the European Central Bank and Bank of England decisions on interest rates. Both are expected to cut rates, but the question is by how much.

Dow Jones Newswires reports that most market participants see the ECB cutting rates by half a percentage point to 3.25%. The BOE is also expected to reduce its rate by half a percentage point to 4.00%.

"If there's any surprise that could come out of the ECB meeting, it would be a larger-than-expected rate cut" given the continent's deteriorating economy, said Mamoru Arai, senior vice president of the foreign-exchange division at Mizuho Corporate Bank. "If that happens, there would likely be a round of euro selling."

Foreigners were net buyers of R1.067bn worth of bonds on Wednesday after net purchases of R1.645bn worth of local bonds on Tuesday, Bond Exchange of South Africa statistics show.

Nominal cumulative volume was R56.074bn on Wednesday from R166.641bn on Tuesday.

- I-Net Bridge.