Johannesburg – South African bonds were firm in afternoon trade on Wednesday on the back of offshore interest‚ but traders said volumes were light.
“There was no local data due today so the foreign buying moved the market‚ but basically the market is waiting until Friday’s Jackson Hole conference‚” a local bond trader said.
At 15:50‚ the benchmark R157 bond was trading at 5.510% from 5.540% at Tuesday’s close. The R207 was trading at 6.630% from Tuesday’s close of 6.640%‚ and the R186 was trading at 7.520% from 7.545%.
The rand was bid at R8.3904 per dollar from R8.3937 at Tuesday’s close.
Dow Jones Newswires reported that US Treasury prices slipped to session lows on Wednesday after the US reported its economy growing faster last quarter than originally thought.
The world's largest economy expanded 1.7% instead of 1.5%‚ according to the Commerce Department. This confirmed expectations widely held by economists‚ who saw better trade activity and consumer spending lift output between April and June.
Demand for safe-haven Treasurys waned following the release‚ sending prices to the lows of the session.
But beyond economic data reflecting past conditions‚ investors are focused on what it means for the Federal Reserve. The central bank has been watching economic readings closely to determine if more monetary stimulus is needed to support growth.
A report on Tuesday provided concrete evidence that housing prices are turning around. Still ahead‚ the US will report pending home sales during July.
Better data may encourage policy makers to hold off on buying more bonds - a move more bond investors have come to expect will be announced at the Fed's September 12-13 policy meeting. Minutes from the prior meeting revealed a greater inclination among its members to deliver support‚ and soon.
That puts the onus on the coming Jackson Hole economic symposium‚ where Fed Chairman Ben Bernanke is due to speak on Friday. A clearer signal that the Fed intends to conduct more bond-buying operations would lift demand for Treasurys.
A more passive easing option is to push out the timing of its first policy-rate increase. The current guidance from the Fed is for late 2014. Many bond strategists see this timetable getting extended to mid- or late-2015.
Such a move would benefit middle-dated Treasury‚ such as five- or seven-year notes.
The US Treasury is scheduled to sell $35bn in five-year debt on Wednesday afternoon.
Foreigners bought a net R1.052bn of South African bonds including repo transactions on Tuesday after net purchases of R200.423m of local bonds on Monday‚ data released by the JSE shows.
Nominal cumulative volume was R205.127bn on Tuesday from R64.836bn on Monday.
Foreigners were net buyers of R546.194m of local bonds excluding repo transactions on Tuesday after net sales of R181.682m of local bonds on Monday.
For the year to date foreigners have been net buyers of R65.530bn 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 R65.366bn of local bonds including repo transactions. In 2011 they bought R37.501bn worth of local bonds.