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Bonds firm on back of stronger rand

Johannesburg - South African bonds were up to 10 basis points firmer in early trade on Tuesday, mainly on the back of the strong local currency.

The National Treasury will auction R1.0bn worth of R203 bonds and R1.1bn worth of R207 bonds at 11:00.

By 09:06, the benchmark R157 bond was trading at 7.560% from its previous close of 7.580%. The R207 was bid at 8.330% and offered at 8.300% from 8.340% and the R186 was bid at 8.415% and offered at 8.485% from 8.520%.

The rand was bid at R7.0003 to the dollar from its previous close of R7.0040.

"The market hasn't traded that much. We're a couple points lower, mainly on the rand. We have the auction later. The R203s have been relatively well-bid in the secondary market so I think they'll do very well. The R207s haven't really seen that much demand. We expect the market to drift lower towards the end of the day," said a local trader.

Standard Bank analysts said in a morning report that foreign portfolio involvement in South African debt had seemingly entered a lull, which had set a weaker tone for South African rates more generally.

"However, this evening's Monetary Policy Review could create some interest for the rest of the week," the analysts added.

Foreigners were net sellers of R285.082m of South African bonds including repo transactions on Monday after net purchases of R52.896m of local bonds on Friday, Bond Exchange of South Africa statistics show.

Nominal cumulative volume was R166.289bn on Monday from R59.894bn on Friday.

Foreigners were net sellers of R470.009m of South African bonds excluding repo transactions on Monday after net purchases of R53.266m of local bonds on Friday.

For the year to date, foreigners have been net buyers of R19.817bn worth of local bonds, excluding repo transactions. In 2010 foreigners bought net R57.064bn worth of local bonds, excluding repo transactions.

For the year to date for total transactions, including repo transactions, foreigners have been net buyers of R11.692bn of local bonds. In 2010 they bought net R44.541bn worth of bonds. 

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