South African bonds remain range bound, failing to react to the volatile rand as the US Memorial Day holiday results in thin trade conditions on Monday afternoon.
SOUTH African bonds were range bound despite a volatile rand in quiet afternoon trade on Monday as the Memorial Day holiday in the US resulted in thin trading conditions.
“It has been very quiet today due to the US holiday even though the rand has moved in an eight cent range against the dollar,” a local trader said.
At 3.52pm, the benchmark R157 bond was trading at 6,325% from Friday’s close of 6,340%. The R207 was bid at 7,570% and offered at 7,560% from a previous close of 7,550% and the R186 was trading at 8,290% from its close of 8,300%.
The rand was bid at R8,3263 against the dollar from Friday’s close of R8,3547. On Monday it traded in a range of R8,2706 to R8,3597.
Dow Jones Newswires reported that while concerns over the health of Spain’s banking system weighed heavily on Spanish bond yields, moves in major currencies were muted Monday, with only small losses in the euro in markets thinned by holidays across some of Europe and the US.
Shares in Bankia S.A. (bkia.mc), Spain’s fourth-largest bank, tumbled 27% when trading resumed on Monday as investors digested the fallout from a à 19bn government bailout announced on Friday.
The gap in yields between Spanish and German 10-year bonds hit its widest level on record, reflecting a stronger urge among investors to hold German paper over the Spanish equivalent.
Meanwhile, the cost of buying protection against a Spanish government bond default also matched its highest-ever closing rate.
The euro, however, was given a modest boost against the dollar after news that Greeces pro-bailout New Democracy party had swung into first place ahead of next month’s elections, according to opinion polls published on Sunday.
The euro did give away some gains later in the session, but moves were muted. Strained areas of the euro zone bond markets and main equity bourses were also quiet with the absence of major US players due to the Memorial Day holiday.
With major employment figures from the US due on Friday, many investors are reluctant to forge any new direction.
“From a macro perspective, the [currency] market is in a holding pattern now until Friday when non-farm payrolls are released,” said Daragh Maher, foreign exchange strategist at HSBC Holdings PLC in London.
“However, the market remains vulnerable to any shift in headline news and data," he added.
Foreigners were net sellers of R1,643bn of South African bonds including repo transactions on Friday after net purchases of R458,202m of local bonds on Thursday, data released by the JSE shows.
Nominal cumulative volume was R55,308bn on Friday from R60,621bn on Thursday.
Foreigners were net sellers of R1,643bn of South African bonds excluding repo transactions on Friday after net purchases of R371,208m of local bonds on Thursday.
For the year to date foreigners have been net buyers of R36,503bn of local bonds‚ excluding repo transactions. In 2011 they were net buyers of R47,359bn worth of local bonds‚ excluding repo transactions.
In the year to date foreigners have been net buyers of R32,573bn of local bonds including repo transactions. In 2011 they bought R37,501bn worth of local bonds.
