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Bonds firmer after US Fed comment

Jan 31 2013 11:02 I-Net Bridge

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Johannesburg - The South African bond market had a firmer tone in early trade on Thursday after comments by the US Federal Open Market Committee (FOMC) on Wednesday evening sparked a US bond market rally‚ but dealers said volumes were minimal ahead of the producer price index (PPI) data at 11:30.

SA’s producer inflation is expected to have increased to 5.5% year on year (y/y) in December from 5.2% y/y in November‚ a survey by I-Net Bridge found.

Forecasts among 10 leading economists surveyed ranged from 5.3% y/y to 5.6% y/y.

“The US bond market rally is reflected in firmer offers‚ but as yet few investors are nibbling as they wait for the PPI data‚” a local bond dealer said.

At 9:04 the benchmark R186 was bid at 7.460% and offered at 7.430% from 7.460% at Wednesday’s close and 7.450% at Tuesday’s close.

The R157 was bid at 5.390% and offered at 5.370% from 5.390% at its previous close and the R207 was bid at 6.435% and offered at 6.405% from its previous close of 6.430%.

The rand was last bid at R9.0592 to the US dollar from R9.0187 at Wednesday’s close and R9.0208 at Tuesday’s close.

Foreigners were net sellers of R333.313m of South African bonds including repo transactions on Wednesday after net purchases of R504.687m of local bonds on Tuesday‚ data from the JSE shows.

RMB said in their morning report that yesterday’s disappointing US growth numbers reiterate that the local bond market should continue to receive decent offshore support in the global search for yield as the Fed remains highly unlikely to cut short its bond repurchasing programme in the midst of US growth woes.

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