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Johannesburg - South African bonds lost up to nine basis points in late trade on Friday after a sharp weakening in the rand owing to a spike in demand for the dollar.
The dollar lost some ground after US CPI came in in line with expectations.
By 16:00, the benchmark R157 bond was trading at 7.695% from 7.610% at the previous close. The R207 was bid at 8.450% and offered at 8.425% from 8.355%. The R186 was bid at 8.620% and offered at 8.615% from its previous close of 8.550%.
The rand was bid at 6.9854 to the dollar from its previous close of 6.8868 after breaching the key 7 rand per dollar level.
Bonds regained some ground earlier in the session after weakening late on Thursday on the SA Reserve Bank's (Sarb's) inflation outlook, South African bonds recovered in early trade on Friday.
The Sarb's Monetary Policy Committee (MPC), as expected, kept the repo rate unchanged at 5.5%, but warned that there would be a "temporary" breach of the 3% to 6% inflation target band in the first quarter of 2012. Inflation was forecast to reach 6.3% in the first quarter of 2012, recede back into the target band in the second quarter of the year and average 5.1% in 2011 and 6.0% in 2012.
Bank governor Gill Marcus said the expected temporary breach of the inflation target band did not necessarily mean an immediate hike in interest rates. She said inflation was currently driven by cost-push pressures such as administered prices and that it was for this reason that the MPC did not "think it was appropriate to raise rates at this stage".
The bank's economic growth forecast for 2011 was revised lower to 3.6% from 3.7% previously. "It's very marginal," Marcus said, urging that too much should not be read into the revision.
A local trader said that there had been an initial kick-up in bonds on Thursday on the riskier inflation outlook, but as soon as that happened there had been keen foreign interest in the market, with demand particularly evident in the benchmark R157.
"But now we've seen bonds weakening again on the back of the rand," he said.
Foreigners were net buyers of R917.793m of South African bonds including repo transactions on Thursday after net purchases of R688.204m of local bonds on Wednesday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R58.736bn on Thursday from R76.438bn on Wednesday.
Foreigners were net buyers of R916.808m of South African bonds excluding repo transactions on Thursday after net purchases of R686.683m of local bonds on Wednesday.
For the year to date, foreigners have been net buyers of R18.527bn 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 buyers of R11.235bn of local bonds. In 2010 they bought net R44.541bn worth of bonds.
The dollar lost some ground after US CPI came in in line with expectations.
By 16:00, the benchmark R157 bond was trading at 7.695% from 7.610% at the previous close. The R207 was bid at 8.450% and offered at 8.425% from 8.355%. The R186 was bid at 8.620% and offered at 8.615% from its previous close of 8.550%.
The rand was bid at 6.9854 to the dollar from its previous close of 6.8868 after breaching the key 7 rand per dollar level.
Bonds regained some ground earlier in the session after weakening late on Thursday on the SA Reserve Bank's (Sarb's) inflation outlook, South African bonds recovered in early trade on Friday.
The Sarb's Monetary Policy Committee (MPC), as expected, kept the repo rate unchanged at 5.5%, but warned that there would be a "temporary" breach of the 3% to 6% inflation target band in the first quarter of 2012. Inflation was forecast to reach 6.3% in the first quarter of 2012, recede back into the target band in the second quarter of the year and average 5.1% in 2011 and 6.0% in 2012.
Bank governor Gill Marcus said the expected temporary breach of the inflation target band did not necessarily mean an immediate hike in interest rates. She said inflation was currently driven by cost-push pressures such as administered prices and that it was for this reason that the MPC did not "think it was appropriate to raise rates at this stage".
The bank's economic growth forecast for 2011 was revised lower to 3.6% from 3.7% previously. "It's very marginal," Marcus said, urging that too much should not be read into the revision.
A local trader said that there had been an initial kick-up in bonds on Thursday on the riskier inflation outlook, but as soon as that happened there had been keen foreign interest in the market, with demand particularly evident in the benchmark R157.
"But now we've seen bonds weakening again on the back of the rand," he said.
Foreigners were net buyers of R917.793m of South African bonds including repo transactions on Thursday after net purchases of R688.204m of local bonds on Wednesday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R58.736bn on Thursday from R76.438bn on Wednesday.
Foreigners were net buyers of R916.808m of South African bonds excluding repo transactions on Thursday after net purchases of R686.683m of local bonds on Wednesday.
For the year to date, foreigners have been net buyers of R18.527bn 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 buyers of R11.235bn of local bonds. In 2010 they bought net R44.541bn worth of bonds.
