Bonds weaker as auction disappoints

Johannesburg - South African bonds were trading slightly weaker at noon on Thursday on the back of a disappointing switch auction this morning and due to a sell-off in the market because of the lack of action by the US Federal Reserve on Wednesday.

“There is a risk that the European Central Bank (ECB) may also not perform to market expectations later this afternoon‚ which could lead to further a bond sell-off and thus more weakening‚” said a local trader.

This morning’s switch auction brought an extra potential R2.5bn into the bond market‚ and it subsequently weakened as a result.

“There was a sell-off and the bond curve got hammered‚ with the outright yield pushed higher. The auction was not very successful with Treasury only doing a third of what they expected. Treasury set the price at 30 points above market for the third time‚ pricing some of the bonds incorrectly. There was a rally after the auction and the curve flattened after that‚” the trader added.

At 11:51 the benchmark R157 bond was trading at 5.530% from Wednesday’s close of 5.500%. The R207 was trading at 6.490% from its previous close of 6.480% and the R186 was trading at 7.335%‚ from its previous close of 7.330%.

The rand was bid at R8.3016 against the dollar from Wednesday’s close of R8.3305.

Foreigners were net buyers of R1.832bn South African bonds including repo transactions on Wednesday after net purchases of R2.031bn of local bonds on Tuesday‚ data released by the JSE shows.

Nominal cumulative volume was R51.269bn on Wednesday from R220.784bn on Tuesday.

Foreigners were net buyers of R1.633bn of South African bonds excluding repo transactions on Wednesday after net purchases of R2.145bn of local bonds on Tuesday.

For the year to date foreigners have been net buyers of R65.323bn of local bonds‚ excluding repo transactions. In 2011 they were net buyers of R47.359bn worth of local bonds‚ excluding repo transactions.

In the year to date foreigners have been net buyers of R61.478bn of local bonds including repo transactions. In 2011 they bought R37.501bn worth of local bonds.