Johannesburg - South African bonds were weaker in
early trade on Tuesday as they tracked the local currency lower.
By 08:50, the benchmark R157 bond was trading at 6.730% from
its previous close of 6.720%. The R207 was bid at 8.095% and offered at
8.065% from a previous close of 8.040% and the R186 was bid at 8.415%
and offered at 8.435% from its close of 8.405%.
The rand was bid at 8.0145 against the dollar from its previous close of 7.9778.
A local trader said the relationship between bonds and the local currency was the story of the day.
"I expected the market to cheapen ahead of the auction but
it's already moving on the rand," said the trader, who accepted some
turnover from the auction.
The rand is weakening on renewed risk aversion following
German finance minister Wolfgang Schaeuble's comments that the European
Union (EU) summit was unlikely to produce a solution to the EU sovereign
"There have been further large portfolio outflows from the SA
bond market from non-residents, demonstrating just how rand depreciation
is taking place mainly through the financial/capital channel rather
than the trade/current account channel," Standard Bank said.
It added that Tuesday morning's disappointing GDP data out of
China did not bode well for SA's trade prospects and the rand, given
that China is now SA's largest export destination.
If China, the world's second-largest economy is slowing, it
would also be rand-negative because poor GDP here would increase global
recessionary fears and aggravate risk aversion, it said.
Foreigners were net buyers of R236.865m of South
African bonds including repo transactions on Monday after net sales of
R25.428m of local bonds on Friday, data released by the JSE
Nominal cumulative volume was R13.546bn on Monday from R12.910bn on Friday.
Foreigners were net buyers of R234.851m of South
African bonds excluding repo transactions on Monday after net sales of
R25.300m of local bonds on Friday.
For the year to date, foreigners have been net buyers of
R40.667bn worth of local bonds, excluding repo transactions. In
2010 foreigners bought net R57.064bn rand worth of local bonds,
excluding repo transactions.
For the year to date for total transactions, including repo
transactions, foreigners have been net buyers of R32.404bn of
local bonds. In 2010 they bought net R44.541bn worth of bonds.