* S.Africa longer bonds gain after auction, R186/R157 spread
flattens
* Rand firms vs dollar but gains limited by strike worries
JOHANNESBURG Oct 16 (Reuters) – Yields on South African
government bonds dropped on Tuesday as prices rose after a
successful auction boosted investors’ sentiment towards Africa’s
largest economy, with the rand also strengthening for the first
day in three against the dollar.
Yields on 14-year benchmark bonds gave up as much
as 8.5 basis points to 7.71 percent while those on the shorter
2015 benchmark fell 4 basis points to 5.37 percent.
The R186/R157 yield spread came back from a lifetime peak
hit in the previous session to trade at 232 basis points on
Tuesday.
“We had a very good auction this morning, local managers and
offshore took out a reasonably good size of the auction so we’ve
settled around the stronger levels without really doing too much
afterwards,” said Mark Southworth, bond trader for Citi in
Johannesburg.
Government sold 2.1 billion rand between the 2023
, 2041 and 2048 bonds, where the
2023 cleared about 4 basis points stronger than market levels
and set the tone for stronger levels in the rest of the market.
Rating agency Standard and Poor’s cut South Africa’s credit
rating to BBB with a negative outlook on Friday, which had since
pressured the longer end of the yield curve.
Dealers said offshore and local accounts were returning to
buy local bonds as the storm was settling and the search for
yield was outweighing domestic factors.
Continued…
