Johannesburg - Government bonds rallied and yields fell in
early Thursday trade, still supported by strong offshore demand while some
local market players were pricing in a slight possibility of a domestic
interest rate cut.
The rand was on a firmer footing against the dollar than in
recent days as global investor risk appetite ticked higher, but could turn
weaker as concerns about eurozone debt woes persist.
The yield on the three-year benchmark fell by 5.5 basis
points to 5.81% while the 14-year paper
was down 7.5 basis points at 7.415%.
“It’s probably just more guys having expectations around a
rate cut and the rand is a little bit stronger so it’s good for bonds,” said
Ian Scott, portfolio manager at Stanlib.
“There are definitely some market players out there are
looking for a rate cut.”
Of 23 economists polled by Reuters last week, 21 expected
the Reserve Bank to keep the repo rate - the rate at which it lends to
commercial banks - at 5.5%, with only two seeing a 50 basis point cut.
Governor Gill Marcus will announce the decision at 13:00
In the poll, seven economists said a 50 basis point cut was
in the offing before year-end to spur growth, but 16 saw the central bank
maintaining its “no change” of the last 20 months for the rest of the year.
The rand was a touch firmer at R8.1535 to the dollar
compared with Wednesday’s close at R8.16, in line with a steadier euro, which
it closely tracks because of South Africa’s strong trading ties with the
“Levels closer to R8.1000 are now looking possible, and
whilst we would look at such a dip as an opportunity to buy dollars, one cannot
exclude the possibility that the rand outperforms in the near term,” Tradition
Analytics said in a note.