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Bonds steady as traders eye data, MPC

Johannesburg - South African bonds were steady in early trade on Tuesday as the market reopened after a public holiday on Monday.

In a busy data-filled week, bonds will eye the SA Reserve Bank's (Sarb's) quarterly economic bulletin, the consumer price index (CPI) and the rates decision on Thursday, following the three-day SARB Monetary Policy Committee (MPC) meeting.

By 08:45, the benchmark R157 bond was trading at 7.875% from its previous close of 7.880%, while the R207 was bid at 8.780% from its previous close of 8.770%. The R186 was bid at 8.975 from its previous close of 8.965%.

The rand was bid at R6.9392 to the dollar from its previous close of R6.9255.

Barclays Capital said in a morning report that expenditure-side GDP figures would come into focus today, with the release of the SARB's quarterly bulletin this morning.

"Following fourth-quarter 2010 production-side GDP figures showing the economy grew by a higher-than-expected 4.4% quarter-on-quarter (q/q) seasonally adjusted annual rate (saar), we look to the quarterly bulletin for a closer look into how the demand-side of the economy fared in the final quarter of 2010. Indications from the 3.5% q/q growth in the trade sector in the fourth quarter are that household consumption spending continued to gain traction, boosted by healthier consumer balance sheets helped through gains in real household disposable income levels and a favourable interest rate environment," they wrote.

On the balance of payments side, from -3.0% of GDP in the third quarter last year, the analysts expect the current account deficit to have narrowed to -2.7% in the fourth quarter.

"Considering a breakdown of the current account, it comes as no surprise that we have pencilled in an even bigger trade surplus for the fourth quarter after two impressive monthly trade surpluses of R8.4bn and R10.3bn in November and December. If our calculations are correct the fourth-quarter trade surplus will be the largest in eight years.

"Though unusual, an overall trade surplus for 2010 is not too surprising given the subdued local appetite for capital goods imports (GDFI remains very low) while the export sector has performed particularly well despite a strong currency. Counter to a wider surplus in the trade account, we are looking for modestly wider deficits in the services, income and transfers accounts. Though the current account deficit is expected to have narrowed a bit in the fourth quarter, if not for a healthy trade surplus, the deficit would likely have widened. This leaves us expecting some expansion in the current account deficit in 2011 (averaging -3.6% of GDP) and pushing out to -4.1% of GDP in 2012," they said.

Foreigners were net sellers of R886.320m of South African bonds including repo transactions on Friday after net sales of R625.122m of local bonds on Thursday, Bond Exchange of South Africa statistics show.
Local markets were closed on Monday for a public holiday.

Nominal cumulative volume was R63.560bn on Friday from R77.679bn on Thursday.

Foreigners were net sellers of R645.666m of South African bonds excluding repo transactions on Friday after net sales of R504.549m of local bonds on Thursday.

For the year to date, foreigners have been net sellers of R15.816bn worth of local bonds, excluding repo transactions. In 2010 foreigners bought net R57.064bn worth of local bonds, excluding repo transactions.

For the year to date for total transactions, including repo transactions, foreigners have been net sellers of R18.226bn of local bonds. In 2010 they bought net R44.541bn worth of bonds.
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