Bonds gain on rand, s/covering

Johannesburg - Bonds were broadly stronger by the late afternoon on Friday on some short covering and after the rand improved overnight. However, trade was generally thin, with one local bond dealer saying today was probably the last slow day before things get back to normal next week.

By 15:25 the short-term government R153 bond was at 7.500% from its previous close of 7.545%. The medium-term R157 was at 7.495% from a previous 7.580%, while the long-term R186 was bid at 7.515% from 7.610%.

The rand was last at R9.6576 to the dollar from a previous close of R9.6341.

"We moved stronger with the rand overnight and there are one or two 'panic buyers', but I think the market is in no man's land. We are watching the currency and the US data," said the senior bond dealer.

"Some investors picked up paper as the market pulled weaker, but there has been nothing over the last four hours," he said.

Another dealer said that a few players on the long end of the market had tried to squeeze the market stronger, leading to the short covering.

He added that some investors may be getting bullish over the new CPI re-weightings this year that are expected to be a factor in bringing the headline numbers down, together with slowing demand.

This data becomes available on February 25 when the January CPI is released.

The dealer also felt that the key issue was that that the selling was probably a little overdone before.

Foreigners were net buyers of R323.076m worth of bonds on Thursday after net sales of R4.233bn worth of local bonds on Wednesday, Bond Exchange of South Africa statistics show.

Nominal cumulative volume was R36.978bn on Thursday from R37.949bn on Wednesday.

- I-Net Bridge