JOHANNESBURG, July 17 (Reuters) – South African government
bond yields continued their decline on Tuesday, with the return
on three-year bonds hitting a record low, as domestic investors
join foreigners in the hunt for yield.
The rand weakened slightly against the dollar as the market
digested U.S. Federal Reserve chairman Ben Bernanke’s promise of
further stimulus for the sluggish U.S. economy if needed, though
he provided no specific details.
At 1538 GMT, the rand was down 0.2 percent against the
dollar, from Monday’s New York close of 8.2100.
Bernanke told lawmakers that the Fed was “prepared to take
further action” to support an economy struggling to create jobs
but did not spell out what that would entail.
“It will be disappointing for some,” Luke Barnett, an
analyst at ETM Analytics said of the testimony. “Some people
were expecting a time frame or measures he was going to
introduce.”
Barnett said the rand would probably continue to trade
within a tight range ahead of the South African Reserve Bank’s
interest rate decision on Thursday. The majority of economists
polled by Reuters expect the bank to hold its repo rate at 5.5
percent.
The yield on South Africa’s benchmark 3-year bond
fell to yet another record low of 5.71 percent, down 5 basis
points from Monday, while that on the 14-year bond
dropped to 7.435 percent from 7.566 percent previously, its
lowest since 2009.
Increased buying by domestic investors was helping to push
yields lower, said Ashley Dickinson, a bond trader at
Renaissance Capital.
“Over the last week we’ve seen local investors getting
involved,” he said. “I think they realised that they had missed
the boat with the initial rally in the market. Most of the fund
managers in the South African space are still pretty much
underweight bonds.”
South Africa’s Treasury sold a total 2.1 billion rand
($255.39 million) worth of its 2023, 2036
and 2048 bonds on Tuesday, with yields declining
across all tenors.
(Reporting by Tosin Sulaiman)
© Thomson Reuters 2012 All rights reserved
