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Bonds firm on short covering

Jan 17 2013 12:26 I-Net Bridge
Johannesburg - The South African bond market was firm in midday trade on Thursday on short covering following a recovery in the rand.

“The shorts have covered their positions‚ which is why we are seeing a firmer bond market. The rand however remains vulnerable‚ which is why since the initial flurry took place this morning there has been no follow-through buying‚” a local bond dealer said.

At 11:45 the benchmark R186 was trading at 7.125% from Wednesday’s close of 7.145%. The R157 was trading at 5.300% from 5.315% at its previous close and the R207 was bid at 6.225% and offered at 6.195% from its previous close of 6.220%.

The rand was last bid at R8.7619/$ from R8.7987 at Wednesday’s close.

Dow Jones Newswires reported that investors may opt to bid stocks lower in Europe on Thursday‚ with bunds and gilts nudging higher‚ as more uncertainty gathers around the European Union (EU).

The UK needs to realise that leaving the European Union could fatally weaken its influence on global finance‚ and should concentrate on improving the 27-member bloc from within‚ one of the UK's biggest continental sympathisers said on Wednesday.

In an interview with Dow Jones Newswires‚ Swedish Finance Minister Anders Borg said that Sweden was "concerned" about talk gathering pace in the UK suggesting that Prime Minister David Cameron may yield to pressure from his own party to call a referendum on EU membership after the next elections‚ due in 2015.

A plan to allow the eurozone's bailout fund to directly boost the capital of banks in countries facing debt troubles now risks being watered down as senior officials discuss ways to implement the proposal. This commitment made last year by the bloc's leaders has been credited with easing Europe's financial crisis.

In meetings this week‚ the head of the bloc's bailout fund told senior finance-ministry officials that injecting capital into weak banks would deplete the fund's lending capacity much faster than extending loans to governments‚ the fund's usual role‚ two eurozone officials said.

Portugal is expected to return to debt markets sooner than anticipated and it is planning to issue five-year bonds in coming days‚ following a successful debt sale on Wednesday‚ reports Diario Economico in its Thursday Internet edition‚ citing unidentified sources.

The International Monetary Fund on Wednesday approved an €838.8m loan tranche for Portugal‚ commending the country's impressive efforts to restructure their economy while cautioning that sizable budget adjustments are still needed.

The International Monetary Fund approved a €3.3bn ($4.3bn) loan tranche to Greece as expected Wednesday‚ giving the official sign-off to the controversial programme.

Treasuries are higher on Thursday‚ after they drifted sideways on Wednesday as bond investors settled into a comfort zone with the US economy still slogging along and inflation well-anchored.

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bonds  |  markets
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