Johannesburg - Bonds were marginally weaker in opening trade on Tuesday on the back of supply issues in what is seen as a busy week for bond issuances.
By 08:55 the short-term government R154 bond was bid at 7.125% and offered at 7.105% after closing at 7.090% on Monday and the medium-term R157 was at 8.220% from 8.200% at its previous close. The long-term R186 was bid at 9.075% and offered at 9.050% from 9.040% previously.
The rand was bid at R7.4253 to the dollar from R7.3868 at its previous close.
"Bonds are a bit weaker because of supply issues. We had the City of Johannesburg issuing R186 equivalents yesterday and today we have the Treasury weekly auction. Tomorrow we have African Bank. Supply seems to have caught up with demand," a local trader said.
Traders noted that there are quite a few bonds coming to the market this week, including the City of Cape Town, African Bank, Investec and Eskom, and the market is concentrating its attention on supply issues.
Together with the R2.1bn worth of bonds being auctioned by the Treasury on Tuesday, the total could be as much as R8bn, a local trader noted.
The National Treasury will auction R700m worth of R203 bonds and R1.4bn worth of R207 bonds on Tuesday at its regular weekly bond auction.
Manufacturing and mining production and Q1 business confidence will be the focus on the data front this week.
"We expect production in both mining and manufacturing to have begun the year on a positive note after posting significant gains in the final quarter of last year. The ongoing strength observed in key sub-components of PMI of late, together with our belief that companies have already begun their inventory re-
stocking process and the fact that manufacturing production continues to come off a relatively low base, supports our forecast for production to have risen 8.0% y/y in January, following December's 3.2% y/y print," AbsaCapital analysts
said in their morning report.
"Our observation of a further improvement in global demand conditions, as well as these low base effects, also leads us to believe that mining production could jump into positive y/y territory in January after December's -2.5% y/y print and build on the positive momentum observed in production the prior
month, where on a 3m/3m seasonally adjusted and annualised basis, production rose 2.5%," they said.
They also expect the BER's business confidence index to reflect the general improvement observed in a host of economic indicators of late.
"However, we continue to believe that still-depressed demand dynamics in the domestic economy are likely to weigh on sentiment in sectors such as retail and private sector construction. The large gains made, particularly in the
production-side of the economy, are however likely to see the index track higher in Q1 2010 after Q4's reading of 28," they said.
Foreigners were net buyers of R250.116m of bonds including repo transactions on Monday, after net purchases of R167.135m of local bonds on Friday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R39.028bn on Monday after R25.090bn on Friday.
Foreigners were net buyers of R467.038m of bonds excluding repo transactions on Monday, after net purchases of R165.715bn of local bonds on Friday.
In the year to date foreigners have been net buyers of R11.173bn worth of local bonds, excluding repo transactions.
So far for total transactions, including repo transactions, foreigners have been net buyers of R12.131bn worth of bonds.
In 2009 foreigners were net buyers of R27.346bn 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