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Bonds softer despite equity market losses

Feb 21 2013 12:21 I-Net Bridge

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Johannesburg - The South African bond market was softer in midday trade on Thursday despite the global equity market selloff that normally results in a flight to safe haven assets such as bonds.

“We would normally gain from an equity market selloff‚ but because the rand is weaker as well‚ foreigners are not buying our bonds and local asset managers are waiting to see what next week’s budget brings‚ so they are sitting on the sidelines‚“ a local bond trader said.

At 11:42 the benchmark R186 was trading at 7.230% from 7.190% at Wednesday’s close. The R157 was trading at 5.305% from 5.290% at its previous close‚ and the R207 was bid at 6.295% and offered at 6.270% from its previous close of 6.270%.

The rand was last bid at R8.9367 to the US dollar from R8.9062 at Wednesday’s close and R8.8521 at Tuesday’s close.

The JSE All Share [JSE:J203] index was down 1.44% at 39 845.99.

Dow Jones Newswires reported that Singapore government bonds saw a flurry of buying at the short end as investors fled to safer assets as the Federal Reserve minutes weighed on risk sentiment and as German manufacturing data spooked investors and sent the euro tumbling.

The yield in the two-year plunged seven basis points to 0.20% while the 10-year was also bid but less aggressively as yield eased to 1.58% from 1.61%.

"All risk assets are in the firing line when their main catalyst for so long‚ QE3‚ threatens to be taken away‚" IG head of premium client management Jason Hughes wrote in a research note.

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