BONDS lost further ground today after retail trade data scuppered any hopes of an interim rate cut. The short-term government R153 bond was bid at 6.765% from its previous close of 6.690%. The medium-term R157 was at 7,970% from a previous 7,885%, while the long-term R186 was bid at 8,405% from a previous 8.305%. The rand was last at R9,8997 to the dollar from a previous close of R9,8291.
"Bonds sold off a bit after the retail trade data, but I don’t think it is justified," said a Cape-Town based bond portfolio manager. "There might not be an interim cut, but it all now depends on how much of a cut we see at the next meeting. Bonds may have overdone the selling a bit as there is still risk of a global recession. While it is a nice number, we have still got problems," he said.
"I think bonds could still come in for interest and we are starting to nibble at the margins," concluded the fund manager. South African retail trade sales at constant (2000) prices for January increased by 1.7% year-on-year (y/y) from a revised drop of –0.2% (-0.1%) in December, figures released on Wednesday by Statistics South Africa show.
Today’s print breaks the eight months of consecutive negative moves by the retail sector. Retail sales growth was expected by analysts to improve gradually this year due to a combination of interest rate cuts - in line with declining inflation and fears of slowing domestic growth - an increase in real wage growth, as well as some tax relief.
Foreigners were net buyers of R847,394m worth of local bonds yesterday after net purchases of R1,807bn worth of local bonds on Monday, Bond Exchange of South Africa statistics show. Nominal cumulative volume was R87,538bn yesterday from R57,361bn on Monday.
