Johannesburg - South African bonds were little changed in early trade on Monday, in what a trader described as a "very quiet" start to the week. The main focus this week will be the Reserve Bank's Monetary Policy Committee (MPC) meeting, which gets underway on Thursday with the rates decision on Thursday afternoon.
By 08:50 the benchmark R157 bond was bid at 7.260% from 7.265% at its close on Friday. The benchmark R207 was bid at 7.970% and offered at 7.940% from 7.950%, while the R186 was bid at 8.050% and offered at 8.020% from 8.020%.
The rand was bid at R7.1630 to the dollar from R7.1675 at its previous close.
A 50 basis point cut is expected for South Africa's repo rate at the meeting on Thursday, according to a survey of 14 leading economists by I-Net Bridge.
Brait economist Colen Garrow said despite good indicators like CPI inflation at 3.7% year-on-year (y/y), PPI inflation at 7.7% y/y, Q2 2010 GDP at 3.2%, slightly better credit aggregates and strong rand exchange rate movements, comments on Thursday by Governor Marcus and MPC member Dr Mnyande have been interpreted as being careful for markets to drum up expectations that there could be a series of rate cuts in this cycle.
"Overall, markets have been more accurate than economists in calling correctly where the interest rate cycle is heading. It's interesting therefore observing what markets forecast - forward rate agreements are discounting a strong 70% probability of rates being eased next week, and a 50/50 chance of a similar sized cut before the end of this year," he said.
"A very quiet start to the week but we should head towards positive territory this week because players will be picking up stock ahead of the MPC meeting. Liquidity is thin today and we're expecting low volume trade as a result of the US holiday," said a local trader. US markets are closed for the Labour Day holiday.
The only local data out on Monday is the RMB/BER third quarter BCI.
Foreigners were net buyers of R752.653m of South African bonds including repo transactions on Friday, after net purchases of R588.8m of local bonds on Thursday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R39.395bn on Friday from R45.040bn on Thursday.
Foreigners were net buyers of R769.782m of South African bonds excluding repo transactions on Friday, after net purchases of R599.065m of local bonds on Thursday.
In the year to date foreigners have been net buyers of R71.876bn worth of local bonds, excluding repo transactions.
So far for total transactions, including repo transactions, foreigners have been net buyers of R64.401bn worth of bonds.
In 2009 foreigners were net buyers of R27.755bn worth of local bonds, excluding repo transactions, while for total transactions, including repo transactions, foreigners were net sellers of R2.424bn worth of bonds.