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Johannesburg - South Africa’s bonds firmed across the curve on Thursday after PMI data showed the manufacturing sector contracted for the second month in August, supporting the case for accommodative monetary policy.
The rand softened to the dollar after its gains to three-week highs below R7.00/$ attracted importers to buy dollars.
Stocks ended in positive territory after starting off on the back foot and investors will be watching US non-farm payrolls on Friday for direction.
South Africa’s Purchasing Managers’ Index rose to 46.7 in August, still showing contraction and suggesting that the manufacturing sector - the second-biggest contributor to gross domestic product - was sluggish in the third quarter.
The Reserve Bank has left the repo rate flat at 5.5% this year, after cutting by 650 basis points in the two years to the end of 2010.
The yield on the 2015 benchmark fell 9.5 basis points to 6.42% and that on the 2026 note fell eight basis points to 8.03%.
The market is pricing in a 50% chance of a rate cut, a turn-around from two months ago when a rate hike by year end was seen as a possibility.
“Even if the market is ahead of itself in discounting a rate cut, the fact is that if there is a long period of sustained rates, demand for bonds will remain,” said Ion de Vleeschauwer, chief dealer at Bidvest.
“6.4% on the 2015 benchmark is pretty good yield so although bonds are expensive those yields are attractive.”
Yields have fallen by 50-70 basis points since the beginning of August, with a ratings downgrade of US debt raising the threat of another recession.
The rand hit a three-week high of R6.9656/$ but came back as those levels attracted dollar buyers.
By early evening, it was trading at R7.0150/$, 0.4% weaker than Wednesday’s New York close of R6.9865/$.
It was at three-week highs against other currencies such as the euro and sterling as well. The rand will have to end the week below R7.00/$ to signal further gains.
The JSE blue-chip Top 40 (Tradeable) [JSE:J200] index was 0.26% stronger at 27 753.42, while the broader All Share [JSE:J203] index added 0.27% 31 088.12.
“There was a bit of profit taking in the morning then a complete 180 as the day progressed,” said Mitchell Gannaway, a trader at Thebe Stockbroking.
“The important thing for the market will be tomorrow, U.S. non-farm payrolls, a lot of people will be waiting for that eagerly to see what happens there.”
The rand softened to the dollar after its gains to three-week highs below R7.00/$ attracted importers to buy dollars.
Stocks ended in positive territory after starting off on the back foot and investors will be watching US non-farm payrolls on Friday for direction.
South Africa’s Purchasing Managers’ Index rose to 46.7 in August, still showing contraction and suggesting that the manufacturing sector - the second-biggest contributor to gross domestic product - was sluggish in the third quarter.
The Reserve Bank has left the repo rate flat at 5.5% this year, after cutting by 650 basis points in the two years to the end of 2010.
The yield on the 2015 benchmark fell 9.5 basis points to 6.42% and that on the 2026 note fell eight basis points to 8.03%.
The market is pricing in a 50% chance of a rate cut, a turn-around from two months ago when a rate hike by year end was seen as a possibility.
“Even if the market is ahead of itself in discounting a rate cut, the fact is that if there is a long period of sustained rates, demand for bonds will remain,” said Ion de Vleeschauwer, chief dealer at Bidvest.
“6.4% on the 2015 benchmark is pretty good yield so although bonds are expensive those yields are attractive.”
Yields have fallen by 50-70 basis points since the beginning of August, with a ratings downgrade of US debt raising the threat of another recession.
The rand hit a three-week high of R6.9656/$ but came back as those levels attracted dollar buyers.
By early evening, it was trading at R7.0150/$, 0.4% weaker than Wednesday’s New York close of R6.9865/$.
It was at three-week highs against other currencies such as the euro and sterling as well. The rand will have to end the week below R7.00/$ to signal further gains.
The JSE blue-chip Top 40 (Tradeable) [JSE:J200] index was 0.26% stronger at 27 753.42, while the broader All Share [JSE:J203] index added 0.27% 31 088.12.
“There was a bit of profit taking in the morning then a complete 180 as the day progressed,” said Mitchell Gannaway, a trader at Thebe Stockbroking.
“The important thing for the market will be tomorrow, U.S. non-farm payrolls, a lot of people will be waiting for that eagerly to see what happens there.”
