South African bonds remained weak during the morning session on Tuesday as a poor auction failed to lift investors’ spirits, and position taking was limited ahead of tomorrow’s inflation release.
"The bond auction turned out terribly. It was cleared at about two and a half points above the market," said a bond trader.
By 11:20 the short-term government R153 bond was at 9.915% from its previous close of 9.910%. The medium-term R157 was at 9.285% from 9.265% at the previous close. The long-term R186 was bid at 9.040% from its previous close of 9.025%.
The rand was last bid at 7.7795 per US dollar from its overnight close of 7.6878.
"Now the market will wait and see what the primary dealers will do with the bonds they were forced to buy," said the trader.
The South African Treasury allotted 450 million rand worth of R206 bonds at a clearing yield of 9.420% shortly after 11:00.
Another dealer said that the results of the bond auction reflected a weak cover ratio that had been seen in the market for the past few weeks. The auction attracted bids of just 1.01 billion rand.
"The market is now buying time ahead of the CPIX data," he added.
The CPIX data, due tomorrow, is the key event for the market as it will provide direction on interest rates and whether inflation expectations need to worsen or not before getting better. Today the market will concentrate mainly on the auction.
Foreigners were net sellers of 59.378 million rand worth of South African bonds on Monday after net purchases of 603.643 million rand worth of local bonds on Friday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was 32.571 billion rand on Monday from 29.577 billion rand on Friday. |
