Bonds unmoved by IMF statement on SA

2012-08-23 19:04

Johannesburg – South African bonds were off their best level in afternoon trade on Thursday even though the International Monetary Fund (IMF) said moderating inflation in SA allowed room for rate cuts.

“We were stronger at midday and the IMF statement had no impact as the market has already priced in some more easing‚” a local bond trader said.

At 15:52‚ the benchmark R157 bond was trading at 5.490% from a best level of 5.430% and 5.510% late on Wednesday. The R207 was bid at 6.605% and offered at 6.580% from 6.630%‚ and the R186 was trading at 7.460% from 7.495%.

The rand was bid at R8.2948 per dollar from R8.2261 at Wednesday’s close and R8.2516 at Tuesday’s close.

The IMF estimated SA’s economic growth will moderate to 2.6% this year‚ it said on Thursday‚ following a visit by its directors to the country.

The global lender expected growth to gradually recover over the medium term to its potential rate of about 3.5%.

The IMF said government debt was still manageable and did not pose any threat to fiscal sustainability.

However‚ it warned that SA’s fiscal space to cope with future shocks had “declined considerably”.

SA’s exposure to the global economy meant any deterioration there would affect the country negatively‚ the IMF said.

It noted that if the external environment were to worsen further‚ the resulting moderation of inflation would allow the Reserve Bank greater room to respond.

Inflation unexpectedly fell to 4.9% year on year last month from 5.5% in June.

The IMF praised SA’s financial institutions‚ referring to them as “well-capitalised” and liquid. Banks’ non-performing loans had partly recovered from the effects of the financial crisis‚ it added.

IMF directors expressed deep worry over the country’s high unemployment rate‚ saying that if not addressed‚ the “stubbornly high” unemployment rate could become politically and socially unsustainable.

It suggested the country needed to build on its many policy successes to expand employment opportunities‚ secure better education and health outcomes‚ and build more efficient infrastructure to support inclusive growth‚ while maintaining macroeconomic and financial stability in a risky global environment.

Foreigners sold a net R1.184bn of South African bonds including repo transactions on Wednesday‚ after net purchases of R726.660m of local bonds on Tuesday‚ data released by the JSE show.

Nominal cumulative volume was R51.402bn on Wednesday from R195.039bn on Tuesday.

Foreigners were net sellers of R1.229bn of local bonds excluding repo transactions on Wednesday after net purchases of R754.267m of local bonds on Tuesday.

For the year to date foreigners have been net buyers of R63.774bn of local bonds‚ excluding repo transactions. In 2011 they were net buyers of R47.359bn worth of local bonds‚ excluding repo transactions.

In the year to date foreigners have been net buyers of R62.876bn of local bonds including repo transactions. In 2011 they bought R37.501bn worth of local bonds.