Bonds edge weaker as rand loses out despite softer dollar
South African government bonds trended weaker on Monday afternoon on a softer rand and despite the euro gaining on the dollar.
Bonds have benefited from the rand’s new-found safe-haven status and analysts have mixed views on the road ahead.
Capital Economics analysts said in a note financial risks remained low in the emerging world, but currency vulnerabilities had increased in a handful of countries. "We have long-term concerns over fiscal positions in a number of emerging markets, including SA."
Budget plans announced in the past couple of months in Egypt and SA aimed to rein in fiscal deficits.
"However, more needs to be done to prevent debt ratios from rising," Capital Economics said.
Investec chief economist Annabel Bishop, however, said it was probable that SA would reflect a marked "tilt away from the downside".
"This is driven by the decreased likelihood of additional credit-rating downgrades and fiscal deterioration in SA," Bishop said.
At 3pm the benchmark R186 government bond was bid at 8.09% from 8.07% and the R207 at 6.935% from 6.92%.
The rand was at R12.0793 to the dollar from R12.0643.
The rand, as well as local bonds, have been fairly stable in the past month despite other emerging-market bond yields spiking, notably in Russia, where sanctions have hit sentiment.
The leap in bond yields, which rise when prices fall, could cost Russian companies that borrow in international bond markets — including aluminium manufacturers and gold producers — hundreds of millions of dollars in additional financing costs, Dow Jones Newswires reported.
The US 10-year treasury was last seen at 2.8603% from 2.8253%.