Bonds slightly firmer as rand recovers lost ground on weaker dollar
South African bonds were slightly firmer on Tuesday afternoon as the rand clawed back lost ground on a weaker dollar.
Analysts described the market as "fickle" after foreign investors bought R6.5bn of SA bonds last week.
"Despite going into a very volatile political environment, and ahead of credit ratings reviews that may warrant some risk-off trade, the opposite could happen as a result of the previous sell-off," analysts at Nedbank Corporate and Investment Banking said.
However, this may turn on any negative headlines or political news, Nedbank said.
Local bonds were sold off after Finance Minister Malusi Gigaba’s medium-term budget policy statement in October, which revealed a more than R50bn fiscal shortfall.
S&P Global Ratings and Moody’s are to announce their rating reviews on November 24. Moody’s is the only ratings agency that has SA one notch above subinvestment grade.
A number of positive political factors also supported the market, including a speech by Deputy President Cyril Ramaphosa in which he propagated a new economic deal that he said would restore investor confidence.
At 3pm the R186 was bid at 9.45% from 9.47% and the R207 at 8.175% from 8.19%.
The rand was at R14.382 to the dollar from R14.4767, while the euro was at $1.1747 from $1.1667.
The euro gained on the dollar after Germany reported its fastest pace of growth since the first quarter of 2011.
Germany’s economy expanded 0.8% during the three months to September, up from the 0.6% in the second quarter and better than the consensus estimate for 0.6%.
US bonds were steady after the 10-year bond yield hit 2.40% on Monday for the first time in 17 months. It was last seen at 2.3922% from 2.4046%.
Data last week suggested investor appetite for high-yield debt appeared to be waning, Franklin Templeton analysts said.
Reasons for the decline included concern over tax reform delays and heightened tension in the Middle East, they said.