Bonds give up brief gains, rand steady

Johannesburg - South African bonds surrendered brief budget-inspired gains on Wednesday after the market digested the deficit forecasts unveiled by Finance Minister Pravin Gordhan and found them unconvincing.

"The budget is not as good as the initial numbers look," said George Glynos, managing director at financial consultancy ETM.

"Bonds have trimmed their gains. They responded to the budget deficit figures but now that the market is dissecting them they do not look realistic," he told Reuters.

Bond yields initially dropped as Gordhan said in his annual budget speech that the budget deficit would narrow to 4.6 percent of gross domestic product in the financial year ending March 2013 from a 4.8% shortfall in 2011/12.

But as the numbers sank in, the market questioned future deficit projections such as four percent of GDP in 2013/14 because the economic growth outlook remains sluggish.

The yield on the 2026 bond went up to 8.24 percent, after hitting a session low of 8.18 percent shortly after the budget speech began.

The 2015 bond also gave up gains with its yield rising to 6.61 percent, from a session low of 6.58 percent.

The rand was virtually unchanged, trading around 7.73 against the dollar, and it was seen tracking global events for direction.

"There is no reason in this budget why the rand should go stronger. Now that this is out of the way it will respond to offshore developments again," said Glynos.