Johannesburg - The South African bond market had a weaker undertone at noon on Wednesday after a disappointing bond auction on Tuesday and a softer rand. The longer end showed most of the weakness‚ while shorter term bonds were stable.
“The trend in the bond market at the moment is that shorter- and medium-dated three- to five-year bonds are performing well. Government is at the moment buying the R206s and the R201s back from investors. Speculation is that government‚ in the budget in February next year‚ will announce that it will actively start buying back the R157s‚” a local trader said.
“However the longer dated bonds have to deal with the uncertainty surrounding the upcoming ANC election‚ the sovereign downgrades‚ a weaker rand‚ rising inflation and a bigger budget deficit for longer. These bonds are therefore selling off and are more volatile as much more risk is involved‚” he added.
The National Treasury announced on Wednesday morning that its next auction would be on November 20‚ and that R700m worth of R209 bonds‚ R700m worth of R213 bonds and R700m worth of R214 bonds would be auctioned.
At 11:29‚ the benchmark R186 was trading at 7.700% from Tuesday’s close of 7.660%. The R157 was trading at 5.470% from its previous close of 5.475%. The R207 was bid at 6.500% and offered at 6.475%‚ from its previous close of 6.470%.