Rand firmer, debt auction strong

Johannesburg - South African government bonds traded steady to firmer on Tuesday after a weekly debt auction suggested a Fitch downgrade of South Africa's credit outlook had not damaged demand for local debt.

The rand also firmed against the dollar after strong growth data in China and better-than-expected German economic sentiment boosted global appetite for riskier assets.

The rand was off a one-month highs of 7.9928 hit earlier, as importers saw those gains as an opportunity to buy the dollar. It traded at 8.05 against the dollar at 15:55 GMT, 0.6% firmer than Monday's New York close of 8.1050.

Yields on the 2015 bond were unchanged from the previous close at 6.77% while the longer-dated 2026 note fell two basis points to 8.525%.

"We saw a strong risk-on theme initiated by good growth data out of China but there's retracement in the risk this afternoon with the euro coming down to the 1.27s," said Duncan Howes, trader at Absa Capital.

The rand was also getting support from a higher gold price - which hit five-week highs - and had potential to firm to the 7.90s in the next few days, said Brigid Taylor, head of institutional sales at Nedbank.

Local inflation and retail sales data will be watched on Wednesday. The market expects inflation to rise to 6.2% year-on-year, and a higher-than-expected number will harden expectations of interest rate rises by the end of the year that would support the rand.

The Reserve Bank is expected to keep its main repo rate at 5.5% on Thursday, with its meeting mainly watched for changes to its inflation forecasts and tone on policy.