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Rand, bonds post momentary recovery

Nov 16 2012 09:48
Reuters
Johannesburg - Yields on benchmark government bonds dropped 2.5 basis points, reflecting a recovery in the local market as offshore buying supported prices on Friday.

The yield on the 2015 bond fell to 5.47% while the 2026 issue dropped to 7.74%.

"There was a bit of late afternoon buying, particularly in the long end, which had taken a bit of knock. We saw real money buying early in the week and it looks like a continuation of that," said a local fixed income dealer.

Bonds and the currency were finding support on Friday as some dealers said the selling looked overdone, even though there was a risk of yields spiking again.

The rand was at R8.9330/$ at 08:44, after weakening to nearly R9 on Thursday, which would be a 3-1/2 year low.

"There was a general risk-off scenario around the world and the charge into risk assets dissipated a little bit," said Malcolm Charles, a fixed income portfolio manager at Investec.

"People are cautious on South Africa and markets are nervous because of that."

The last time the currency came near the R9/$-level was on October 8, when market players speculated the central bank had stepped in to stop the currency hitting the key level.

"As long as dollar/rand stabilises near 8.90 today and ends the week above 8.84, then the uptrend remains firmly in place," said Absa Capital's Judy Padayachee, adding that she expected a 8.89-8.98 range in the session.

The bank said it was looking to buy dollars at 8.88-8.90 today to target 9.20 in the weeks ahead.  

Treasury will sell inflation-linked 2022, 2038 and 2050 paper at 11:00, with results due after the auction closes.

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