Bonds recoup lost ground as emerging market sell-off stabilises
South African government bonds staged a relatively stronger recovery on Wednesday morning, suggesting that investors were taking advantage of the higher yields on offer.
The yield on the benchmark R186 bond was at 8.325% in early trade, pulling back from 8.475%, which marked its highest point since late January, according to the Iress data.
The local fixed-income market was caught up in the sell-off of emerging markets assets on Tuesday, which resulted in a much weaker rand, before it subsequently stabilised.
The improvement in yields came as the Treasury announced that it had successfully placed $2bn worth of notes in international markets, maturing in 2030 and 2048, respectively.
The transaction was more than 1.7 times oversubscribed in aggregate with investor demand from across all the major financial centres in the US, Europe, the UK, Middle East and Asia, the Treasury said in a statement.
The US government bond rates were also relatively stable in early trade, after a rise in yields on Tuesday fed to high interest rates narrative.
"While we can expect some volatility in the short term as sentiment changes on a daily basis, it is in the longer term that the deck seems to be stacked for a stronger US dollar," according to TreasuryOne currency dealer Andre Botha.
"With the developed markets tightening their monetary policy, all flows that went into emerging markets from accommodative central banks are slowly drying up. The flight of capital could be quite severe for emerging markets."
At 10.17am, the R207 was at bid 7.195% from 7.345% while the rand was at R12.5384 to the dollar from R12.5662.