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Bonds weak on rand ahead of MPC

Johannesburg - South African bonds were weak in midday trade on Thursday due to a soft rand ahead of the monetary policy committee (MPC) decision due shortly after 15:00.

None of the economists polled by I-Net Bridge expects a change in the repo rate.

“The soft rand is the main reason behind this morning’s weakness. We expect a fairly hawkish MPC statement to provide some support for the rand‚ but all talk and no action does not get you anywhere‚” a local bond trader said.

At 11:40 the benchmark R186 was trading at 7.065% from 6.905% at Wednesday’s close and 7.015% at Tuesday’s close.

The R157 was trading at 5.210% from 5.125% at its previous close‚ and the R207 was bid at 6.185% and offered at 6.155% from 6.020% at its previous close.

The rand was bid at R9.62607/$ after reaching a worst level of R9.6920/$ from R9.5674/$ at Wednesday’s close and R9.5467/$ at Tuesday’s close.

The bond market has been unusually jumpy since the Bank of Japan unveiled its new easing programme in early April.

The intraday range for the 10-year yield the day after the programme was announced was 30.5 basis points.

Thursday's 17.5 basis point intraday range was the highest since then.

Fund managers and dealers believe the turbulent market conditions will continue over coming weeks.

Market players will increasingly have to switch to trading strategies amid the price gyrations‚ away from the holding strategies they had used in recent years to take advantage of calm market conditions.

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