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Johannesburg - South African bond yields were firmer in early trade on Thursday, ahead of the Reserve Bank's Monetary Policy Committee (MPC) meeting's interest rate decision which will be announced shortly after 15:00.
By 08:00 the benchmark R157 bond was at 7.170% from 7.200% at its close on Wednesday. The R186 was bid at 7.850% from 7.880%.
The rand was bid at R7.2238 to the dollar from R7.2285 at its previous close.
Hopes have been pinned on a cut after lower than expected inflation, the stronger rand and the fragile economic recovery, as suggested by the second quarter 3.2% growth compared to 4.6% in the first quarter.
According to a survey of 14 leading economists by I-Net Bridge, a 50 basis point cut is expected for South Africa's repo rate at the MPC meeting.
Nomura's Peter Attard Montalto said that recent data may well be labelled as key, but he believes when combined with a worsening international outlook and markets strongly pricing in a cut that the Sarb will find itself in a situation where it has to reduce rates by 50 basis points.
"We think it would do well to curb a potential spiralling down in market expectations towards future cuts," he said.
"Bonds have firmed ahead of the rates decision today. The shorter end has appreciated to the extent that it expects a 50 basis point cut.
It looks like there will be cut today, and then one later in the year or early next year," said a local trader.
Foreigners were net buyers of R545.201m of South African bonds including repo transactions on Wednesday, after net purchases of R3.840bn of local bonds on Tuesday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R44.533bnon Wednesday from R175.708bn on Tuesday.
Foreigners were net buyers of R781.418m of South African bonds excluding repo transactions on Wednesday after net purchases of R3.830bn of local bonds on Tuesday.
In the year to date foreigners have been net buyers of R75.686bn worth of local bonds, excluding repo transactions.
So far for total transactions, including repo transactions, foreigners have been net buyers of R67.988bn worth of bonds.
In 2009 foreigners were net buyers of R27.755bn worth of local bonds, excluding repo transactions, while for total transactions, including repo transactions, foreigners were net sellers of R2.424bn worth of bonds.