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“The CPI data was better than expected so that helped in the morning and in the afternoon we have seen continued foreign buying despite the weak rand‚” a local bond trader said.
At 15:44pm‚ the benchmark R157 bond was trading at 5.510% from 5.560% at Tuesday’s close and 5.610% at Monday’s close. The R207 was trading at 6.630% from its previous close of 6.640%‚ and the R186 was trading at 7.495% from its previous close of 7.545%.
The rand was bid at R8.3148 per dollar from R8.2516 at Tuesday’s close.
Dow Jones Newswires reported that recent leading indicators showed a near universal slowdown in global economies. China's started at the turn of the year‚ Europe's has been on a steady downtrend since last year at least‚ Japan rolled over early in the spring and the US followed a bit later.
The result is a new round of easing. The Bank of England has restarted quantitative easing and the People's Bank of China has cut rates. The US Federal Reserve is widely expected to start up its third big round of quantitative easing this autumn‚ while the markets have priced in a European Central Bank bond-buying exercise.
But will this time be any different?
Since the financial crisis of 2008‚ central banks have been trying to kick-start their economies by turning on the printing presses. But it hasn't worked.
One possibility is that there is a global liquidity trap. In economists' shorthand‚ central banks are pushing on a string. One reason for this is that the transmission mechanism between central bank policy and the end borrower has broken down‚ particularly on both sides of the Atlantic and especially in economies with long-standing current account deficits. Here‚ an excess of borrowing in the past has left economies with crippled banks and households needing to deleverage. With consumption down in these countries‚ it's necessary for surplus countries to boost domestic consumption. But they're not. They continue to rely on the export-driven model that's served them so well during the past decade.
The result is that central bank easing in deficit countries has done very little for growth‚ while easing in surplus countries has merely boosted supply amid rising investment levels.
The rate of consumer inflation was expected to have eased further‚ to 5.2% year on year (y/y) in July from 5.5% y/y in June‚ according to a survey of leading economists by I-Net Bridge.
Forecasts among the 10 economists ranged from 5.1% to 5.4%. The actual July number was out of range at 4.9% y/y.
The National Treasury will auction R1.1bn worth of R2023 bonds‚ R500m worth of R214 bonds and R600m worth of R2048 bonds on August 28.
Foreigners were net buyers of R726.660m of South African bonds including repo transactions on Tuesday after net purchases of R1.115bn of local bonds on Monday‚ data released by the JSE show.
Nominal cumulative volume was R195.039bn on Tuesday from R57.354bn on Monday.
Foreigners were net buyers of R754.267m of local bonds excluding repo transactions on Tuesday after net purchases of R1.137bn of local bonds on Monday.
For the year to date foreigners have been net buyers of R65.003bn 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 R64.060bn of local bonds including repo transactions. In 2011 they bought R37.501bn worth of local bonds.
