South African bonds staged a strong recovery today, along with the rand, as global and local markets cheered the massive European Union package announced to stabilise the euro and ease debt concerns.
By 16:00 the short-term government R154 bond was bid at 6.835% and offered at 6.815% after closing at 7.060% on Friday and the medium-term R157 was at 8.080% from 8.300% at its previous close. The long-term R186 was bid at 8.945% and offered at 8.935% from 9.150% previously.
The rand was bid at R7.4871/$ from R7.5850/$ at its previous close. This marks a strong recovery in the rand, which was bid as high as R7.84/$ at one stage on Friday.
Traders said receding risk aversion after the EU reached a deal has benefited global markets and local markets.
Dow Jones Newswires reports that the European Central Bank made a stunning U-turn in the early hours today, saying it will intervene in the eurozone's public and private debt markets, among other things.
The move is aimed to "ensure depth and liquidity in those market segments which are dysfunctional," the ECB said in a snap statement.
Financial markets moved higher on the announcement, which came within one hour after eurozone finance ministers said they created a €500bn support plan for countries facing financial meltdown.
The money would be available to rescue eurozone economies that get into financial troubles, finance ministers said. The plan would consist of €440bn of loans from eurozone governments, €60bn from an EU emergency fund, plus €250bn from the IMF, diplomats and ministers said.
Looking ahead to later in the week, local bonds will watch closely the outcome of the Reserve Bank's Monetary Policy Committee on Thursday afternoon. In March the Bank surprised the markets with a 50 basis point cut in the repo rate, although most economists are expecting no change in rates at the May meeting.
Foreigners were net sellers of R2.411bn of South African bonds including repo transactions on Friday after net sales of R327.585 million of local bonds on Thursday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R33.035bn on Friday from R68.232bn on Thursday.
Foreigners were net sellers of R2.411bn of South African bonds excluding repo transactions on Friday after net sales of R330.157 million of local bonds on Thursday.
In the year to date foreigners have been net buyers of R28.103bn worth of local bonds, excluding repo transactions.
So far for total transactions, including repo transactions, foreigners have been net buyers of R24.748bn worth of bonds.
In 2009 foreigners were net buyers of R27.755bn worth of local bonds, excluding repo transactions, while for total transactions, including repo transactions, foreigners were net sellers of R2.424bn worth of bonds.
