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Bonds weak after poor ILB auction

Jan 11 2013 13:06 I-Net Bridge

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Johannesburg - The South African bond market remained weak in midday trade on Friday after the National Treasury’s auction of inflation linked bonds (ILB) only attracted bids worth R345 million for the R800 million on offer.

The weak tone of the market was in part due to Fitch’s ratings downgrade of SA‚ announced late on Thursday.

Fitch cut SA’s sovereign credit rating by one notch to BBB.

“The ILB auction just confirmed the negative trend in the market today. What worries me is not just the poor fiscal debt dynamics that Fitch highlighted‚ but also the structural issues. In particular the issue of poor service delivery and the increasingly violent industrial action‚” a local bond dealer said.

At 11:47 the benchmark R186 was trading at 7.130% from Thursday’s close of 7.090%. The R157 was trading at 5.310%‚ the same as its previous close and the R207 was bid at 6.185% and offered at 6.155% from its previous close of 6.150%.

The rand was last bid at R8.6699 to the US dollar from R8.6566 at Thursday’s close and R8.5999 at Wednesday’s close.

The National Treasury allotted R130m of the I2038 bond after receiving bids worth R150m‚ R90m of the I2025 from bids worth R110m and R85m of the I2050 bond after bids worth R85m.

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