* Weekly government bond auction well supported
* Rand tracks euro weaker as growth worries bite
JOHANNESBURG May 2 (Reuters) – South African government
bonds rallied on Wednesday and yields fell on strong demand from
foreign accounts but the rand weakened against the dollar,
tracking a softer euro as data pointed to weak growth in that
region.
The yield for the benchmark three-year bond fell
6.5 basis points on the day to 6.4 percent, a two month low, and
that for the 14-year paper closed 4.5 basis points
lower at 8.135 percent.
Earlier, South Africa’s Treasury sold a total of 2.1 billion
rand of its 2021, 2026 and 2041
bonds, with bid-to-over ratios of 3.51, 2.13 and 2.98
respectively.
“We had a reasonably strong auction today and it looks like
there’s a lot of foreign support again for the market, obviously
following U.S. Treasuries as well as (German) Bunds,” a bond
trader in Johannesburg said.
“Globally there’s interest in fixed income and that’s our
story for the day. It’s got a bit of momentum and we should be
able to maintain (the rally) for the rest of the week.”
Traders said demand was still anchored on prospects of South
African debt being included in Citi’s World Government Bond
Index later this year, a move which could potentially trigger
billions of dollars worth of portfolio flows.
The bond rally however failed to boost the rand,
which retreated from earlier one-month highs in line with a
weaker euro as data reinforced fears of a slowdown in Europe, a
key market for South African exports.
Continued…
