Bonds firm slightly despite worse-than-expected current account deficit
South African bonds strengthened slightly on Tuesday shortly before midday, with the market unaffected by slightly worse-than-expected current account data and calls for the Reserve Bank to ditch protecting the value of the rand.
SA’s adjusted current account deficit widened to 2.1% in the first quarter of 2017 from 1.7% in the fourth quarter of 2016, the Reserve Bank said in quarterly bulletin on Tuesday.
The R92bn deficit was above the R85bn forecast by economists in a Trading Economics survey.
Capital Economics economist John Ashbourne said the widening of the current account remained "small by recent standards", which would help shield rand value.
Market losses from local controversies, including surprise revisions to the Mining Charter last week and a call for constitutional change to the mandate of the Reserve Bank on Monday, are likely to be contained, Rand Merchant Bank analyst John Cairns said.
At 11.30am the R186 was bid at 8.535% from Monday’s 8.55% and the R207 at 7.5% from 7.505%.
The rand was at R13.0296 to the dollar from R12.9891.
Bonds had weakened significantly on Monday after the rand declined almost 2% in intraday trade. This followed calls from Public Protector Busisiwe Mkhwebane that the Reserve Bank stop protecting the value of the rand in favour of "socioeconomic" protection of citizens.
Analysts said the recommendations, even if implemented, were far on the horizon.
Bonds continue to be supported by strong investor demand for emerging-market debt, despite downgrades of SA’s sovereign credit risk and political uncertainty, the Reserve Bank said on Tuesday.
"The moderate sovereign credit risk response, in turn, should be gauged relative to recent global experiences in Brazil and Russia," the Bank said.