South African shorter term bonds weakened by ten points during the morning session on Wednesday in the wake of a weaker rand and slightly less confidence a rate cut is on the cards
South African shorter term bonds weakened by ten points during the morning session on Wednesday in the wake of a weaker rand and slightly less confidence a rate cut is on the cards.
By 11:57 the benchmark R157 bond was at 7.110% from 7.005% at the previous close, while the R207 was bid at 7.960% from 7.850% at its previous close. The R186 was at 8.180% after closing at 8.120%.
The rand was bid at 7.0306 to the dollar from its previous close of 7.0282.
"SA bonds are on the back foot this morning amid rand losses, diminishing the benefits on inflation of the last year's relative rand strength, and negative sentiment in global bond markets amid fears the Irish debt crisis may lead to contagion in the region," said Nedbank Capital.
The rand weakened further in the wake of better than expected retail sales data. This data diminishes the chances of a rate cut, according to a dealer.
South African retail trade sales at constant (2008) prices for September increased more than expected by 6.1% year-on-year (y/y) after 4.6% growth in August, figures released on Wednesday by Statistics South Africa showed.
A survey of leading economists by I-Net Bridge had expected retail trade sales to increase 4.2% y/y.
Forecasts among the seven economists had ranged from 3.0% to 5.5%.
The Reserve Bank's Monetary Policy Committee meeting gets underway today and ends with the rates decision at around 15:00 on Thursday. A 50 basis point cut in the repo rate is expected, according to a survey of 11 leading economists by I-Net Bridge. Rates were cut by 50 basis points to 6.0% in September.
Foreigners were net sellers of R1.004bn of South African bonds including repo transactions on Tuesday after net purchases of R558.801m of local bonds on Monday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R157.791bn on Tuesday from 46.924 billion rand on Monday.
Foreigners were net buyers of R70.308m of South African bonds excluding repo transactions on Tuesday after net sales of R135.877m of local bonds on Monday.
In the year to date foreigners have been net buyers of R72.111bn worth of local bonds, excluding repo transactions.
So far for total transactions, including repo transactions, foreigners have been net buyers of R66.015bn 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 R3.3bn worth of bonds.
