Fin24

Bonds, rand firm ahead of mini budget

2012-10-25 09:25

Johannesburg - Bonds rose on Thursday after higher-than-expected inflation data in the previous session with trading expected to be thin ahead of the Treasury’s release of the medium-term budget later in the day.

The yield on the benchmark 3-year bond and the longer dated 14 year paper were both 2 basis points lower at 5.44% and 7.685% respectively.

By 06:51 GMT, the rand was trading at R8.73 to the dollar, 0.6% firmer than Wednesday’s New York close of R8.7810.

“The long end of the yield curve will be supported. There may be a little bit of curve flattening,” said Michael Grobler, a fixed income analyst at Afrifocus Securities.

“As long as the rand stays below R8.82, there’s going to be demand for the long end of our yield curve.”

Finance Minister Pravin Gordhan faces the hard task of balancing demands, in his mid-term budget speech, for increased social spending from a restive population while reassuring investors and ratings agencies he is committed to reining in the budget deficit.

The minister will deliver the medium-term budget at 12:00 GMT.

South Africa’s headline consumer inflation accelerated to 5.5% year-on-year in September from 5% in August, government data said on Wednesday.