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Johannesburg - The rand eased against the dollar in early
Tuesday trade but remained firmer than the psychologically key R8 to the dollar
level, while government bonds gained ahead of an auction later in the session.
The rand dropped 0.65 percent to a session low of R7.9815
against the dollar in early morning trade compared with a close of R7.93 in New
York on Monday.
A Spanish bond auction later in the day is likely to keep
risky assets under pressure as investors remain nervous about the sale and the
outlook for the eurozone.
The rand has support around R8 to the dollar and may find a
barrier to further gains around R7.86.
Government bonds were firm at the open, with yields trading
2.5 basis points lower ahead of an auction that usually keeps traders on the
sidelines waiting for the sale.
Yields on the benchmarks were at 6.695% on the three-year
note and 8.41% on the 14-year issue.
"The Spain story still has the rand spooked and trading
close to its worst levels in the last 10 days. Surprisingly the market opened a
couple of points firmer this morning despite the auction and this may be on the
back of short covering," said Alvin Chawasema, a bond trader at Renaissance
BJM.
Treasury has offered 2018, 2021 and 2031 paper. Results are
due after the auction closes at 09:00 GMT.
"In the auction we reckon the R208 and R204 should be better supported in comparison to the R213. On the whole, the auction may receive less support if the current market depth is anything to go by," Chawasema said.
