Safe-haven flows prop up bonds
Johannesburg – South African bonds were softer in quiet afternoon trade on Friday‚ but supported by safe-haven flows as global equity markets suffered yet another sell-off.
“We should have been a lot weaker given the softer rand‚ but we are being supported by safe-haven flows as equity markets tank once again‚” a local trader said.
At 15:46‚ the benchmark R157 bond was trading at 6.275% from Thursday’s close of 6.230%‚ Wednesday’s close of 6.260% and Tuesday’s close of 6.330%. The R207 was bid at 7.550% and offered at 7.520% from a previous close of 7.500% and the R186 was trading at 8.290% from its close of 8.245%.
The rand was bid at R8.4631 against the dollar from Thursday’s close of R8.3966‚ Thursday’s best level of R8.2154 and a worst level on Monday of R8.6291.
Dow Jones Newswires reported that the euro drifted lower in European trading hours on Friday‚ despite reports that Spain could be set to request international aid for its struggling banks as soon as this weekend.
Just one day after Fitch Ratings delivered a three-notch downgrade to Spanish debt‚ a euro-area official told Dow Jones Newswires that aid for the country was a “likely” topic for a teleconference among European Union finance ministers and other senior officials this weekend.
There had not yet been a decision on how or when to provide support for the country‚ the official said.
Trader pessimism has been further fuelled by data flow from the eurozone. Italy’s industrial output fell 9.2% on the year‚ against consensus expectations of a 6.4% contraction. Data from Greece also showed that recession in the country looks set to deepen in the second quarter of the year‚ with the economy contracting 6.5% on the year in the first three months of 2012.
Nervousness about more bad global economic news also persisted ahead of a slew of data due on Saturday from China‚ with many analysts suspicious that Thursday's surprise interest rate cut by China presages a dreary run of official data.
China will publish inflation numbers‚ industrial output figures and producer prices data on Saturday‚ and Sunday will see the release of trade figures.
Foreigners were net buyers of R707.57m of South African bonds including repo transactions on Thursday after net purchases of R2.962bn of local bonds on Wednesday‚ data released by the JSE show.
Nominal cumulative volume was R35.5bn on Thursday from R61.8223bn on Wednesday.
Foreigners were net buyers of R728.955m of South African bonds excluding repo transactions on Thursday after net purchases of R2.962bn of local bonds on Wednesday.
For the year to date foreigners have been net buyers of R35.171bn 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 R31.842bn of local bonds including repo transactions. In 2011 they bought R37.501bn worth of local bonds.