Bonds retreat on weaker rand

Johannesburg – South African bonds retreated in early trade on Tuesday amid a softer rand as some concerns crept into global
markets after the euphoria on Monday stemming from the announcement of the massive euro debt rescue package.

By 09:00 the short-term government R154 bond was bid at 6.915% and offered at 6.895% after closing at 6.860% on Monday and the medium-term R157 was at 8.160% from 8.105% at its previous close. The long-term R186 was bid at 9.025% and offered at 9.005% from 8.975% previously.

The rand was bid at R7.5344 to the dollar from R 7.4750 at its previous close.  

A local bond trader said that global markets were nervous again, this time about the sheer size of the rescue package. Questions are now being raised about the long-term sustainability of the deal. "That is now being weighed into the equation, along with the softer rand," he said.

He added also that there was also some positioning ahead of the weekly government bond auction later this morning. The National Treasury will auction R1.2bn worth of R208 bonds and R900m worth of R186 bonds at its regular weekly auction at 11:00.

He added that he expects a strong auction – especially in the R186s. He also noted that there had been offshore buying at current levels. Foreigners were net buyers of R871.507m of South African bonds including repo transactions on Monday after net sales of R2.411bn of local bonds on Friday, Bond Exchange of South Africa statistics show.

Nominal cumulative volume was R26.146bn on Monday from R33.035bn on Friday.

Foreigners were net buyers of R874.144m of South African bonds excluding repo transactions on Monday after net sales of R2.411bn of local bonds on Friday.

In the year to date foreigners have been net buyers of R28.977bn worth of local bonds, excluding repo transactions.  

So far for total transactions, including repo transactions, foreigners have been net buyers of R25.620bn 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.

 - I-Net Bridge