Johannesburg - South African bonds were 3-4.5 basis points firmer on Tuesday morning, rallying on better than expected current account data as well as a strong auction.
By 12:10 the short-term government R154 bond was bid at 7.005% and offered at 6.985% after closing at 7.035% on Monday and the medium-term R157 was at 8.100% from 8.145% at its previous close. The long-term R186 was bid at 8.865% and offered at 8.850% from 8.920% previously.
The rand was bid at R7.3071 to the dollar from R7.3019 at its previous close.
A local trader said that the better than expected current account deficit number had buoyed bonds.
South Africa's current account deficit reduced to -2.8% of GDP in the fourth quarter of 2009 from -3.1% in the third quarter, the South African Reserve Bank said in its latest quarterly bulletin. For calendar 2009, the deficit was -4.0 of GDP compared to -7.1% for calendar 2008.
A survey of ten leading economists by I-Net Bridge had pinned the Q4 current account deficit down at -3.6% of GDP. The forecast range for the expected deficit varied from -4.3% to -3.5% of GDP.
Added to this was the strong weekly bond auction, where the R206s were especially well bid, the trader added.
The South African Treasury on Tuesday allotted R1.5bn worth of R207 bonds at a clearing yield of 8.780% and R600m worth of R206 bonds at a clearing yield of 8.150 at its regular weekly auction.
"It seems the market strongly supported the R206s as some players are expecting a rate cut on Thursday," he added.
This is a busy data week with consumer inflation data due Wednesday. The consumer inflation index - the measure used by the South African Reserve Bank for its inflation target - is expected to have decreased to 5.7% year-on-year (y/y) in February from 6.2% in January, according to a survey of 11 leading economists by I-Net Bridge.
This snaps the two months of increases above 6% after the index had slipped back below the 6% radar level for two months prior to that. The rises, though, were not unexpected as base effects fed through.
Forecasts among the economists ranged from 5.5% to 5.9%.
The lower reading could prompt the central bank to drop interest rates on Thursday, according to some analysts. The other factor is that the strong rand has made importing goods cheaper.
It is also the Reserve Bank's Monetary Policy Committee meeting on Wednesday, with the decision on interest rates expected at around 15:00 on Thursday. PPI is also due for release on Thursday at 09:00.
The CPI and PPI releases have both been re-scheduled to 09:00 instead of their usual 11:30 time slot to accommodate the SARB MPC meeting.
Foreigners were net sellers of R4.804bn of South African bonds including repo transactions on Friday, after net sales of R199.419m of local bonds on Thursday, Bond Exchange of South Africa statistics show. Local markets were closed Monday for a public holiday.
Nominal cumulative volume was R60.010bn on Friday from R88.267bn on Thursday.
However, foreigners were net buyers of R276.355m of South African bonds excluding repo transactions on Friday, after net sales of R84.025m of local bonds on Thursday.
In the year to date foreigners have been net buyers of R16.023bn worth of local bonds, excluding repo transactions.
So far for total transactions, including repo transactions, foreigners have been net buyers of R11.094bn worth of bonds.
In 2009 foreigners were net buyers of R27.346bn worth of local bonds, excluding repo transactions, while for total transactions, including repo transactions, foreigners were net sellers of R2.424bn worth of bonds.
