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Bonds firm on switch auction‚ PPI

Johannesburg – South African bonds were firm in midday trade on Thursday on the back of a successful switch auction and lower than expected producer price index (PPI).

“We should be weaker given the softer rand‚ but both the switch auction results and PPI data‚ which came out at the same time‚ supported the market‚” a local bond trader said.

At 12:00‚ the benchmark R157 bond was trading at 5.490%‚ from 5.510% at Wednesday’s close. The R207 was bid at 6.595% and offered at 6.570% from Wednesday’s close of 6.610%‚ and the R186 was trading at 7.480% from 7.505%.

The rand was bid at R8.4343 per dollar from Wednesday’s close of R8.4049.

The National Treasury wanted to switch R3bn worth of R201 bonds into R186 and R213 bonds at 10:00. It said it switched R1.035bn into the R201 bond after receiving bids worth R3.33bn‚ while it switched R1.855bn into the R201 bond after receiving bids worth R2.665bn.

SA’s producer inflation increased by 5.4% year on year in July from a 6.6% rise in June‚ Statistics SA data on Thursday showed.

A consensus among eight economists was that the rate of increase in PPI would slow to 5.6% year on year in July.

PPI was up 1.6% on the month‚ while export inflation rose 0.9% on the year‚ but went down 0.9% on the month.

Inflation for imported commodities rose 6.6% on a year on year basis‚ and was down 2.3% on the month.

Foreigners bought a net R1.596bn of South African bonds including repo transactions on Wednesday after net purchases of R1.052bn of local bonds on Tuesday‚ data released by the JSE show.

Nominal cumulative volume was R48.101bn on Wednesday from R205.127bn on Tuesday.

Foreigners were net buyers of R1.791bn of local bonds excluding repo transactions on Wednesday after net purchases of R546.194m of local bonds on Tuesday.

For the year to date foreigners have been net buyers of R67.321bn 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 R66.962bn of local bonds including repo transactions. In 2011 they bought R37.501bn worth of local bonds.

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