Johannesburg - The rand and government bonds were steady
early on Friday with investors choosing to stay on the sidelines until a clear
domestic economic picture emerges, including from an interim budget due next
week.
The rand was at R8.6450 at 06:41 GMT, marginally firmer
within its two-day range. It closed at R8.6520 in New York on Thursday.
The unit may stay stuck around the R8.54-R8.60 levels in
this session as investors await a clearer picture out of domestic labour unrest
in the mining sector.
Gold Fields [JSE:GFI], the world’s fourth biggest gold
producer, said striking workers at its KDC West operations in Carletonville, 40
km west of Johannesburg, have returned to work, ending a month long strike.
However, 4 000 workers downed tools at Lonmin’s troubled
Marikana platinum mine once again on Thursday in protest at the recent arrest
of three colleagues.
“While on the one hand, Goldfield workers have resumed work
and Kumba Iron Ore has resumed production, our sense is that the labour
situation remains tense,” said Mike Keenan, a forex strategist for Absa
Capital.
“And with two key South Africa-specific events in the
pipeline and a fragile macroeconomic backdrop to boot, we still feel that the
rand offers limited value at current levels.”
Investors are waiting on Finance Minister Pravin Gordhan’s
Medium Term Budget Policy Statement (MTBPS) on Thursday, which will signal to
the bond market how much the government plans to borrow over the coming months.
The ruling ANC also holds an internal leadership election in
December, leaving investors guessing about the possibilities of policy change in
Africa’s largest economy.
Yields on government debt edged lower to 5.39% on the 2015
note and 7.575% on the 2026 issue.
The yield differential between the two benchmarks narrowed
from Tuesday as the long end outperformed the front. The R186/R157 spread
closed at 218 basis points on Thursday compared with a life-time high of 237
basis points on Monday.
So far in early Friday trade the spread has held at 218
basis points.
“The front has underperformed. There is big end-user buying
of R186’s so that has kept market-makers on their toes and needing to cover,”
said Richard Farber of Worldwide Capital.
Treasury will sell a total of R800m of inflation-linked bonds spread between the I2025, I2038 and I2050 issues at 09:00 GMT. The longer bonds are expected to clear at better than market levels.