* Rand rides on positive global risk sentiment
* Bonds edge up, increased state borrowing could weigh
JOHANNESBURG Feb 20 (Reuters) – The rand strengthened
against the dollar on Monday on rising global risk appetite and
South African government bonds edged higher, but local debt
could come under pressure if the government signals a rise in
borrowing in its budget this week.
Economists expect Finance Minister Pravin Gordhan to target
a budget deficit of 5.4 percent of GDP for the 2012/13 fiscal
year when he unveils his annual budget on Wednesday. That would
be down from an estimated 5.3 percent of GDP in 2011/12 but
higher than a forecast of 4.8 percent of GDP for 2012/13 made in
last year’s budget as the government ramps up spending on
infrastructure and social services.
At 1629 GMT the rand was 1.07 percent firmer at 7.66
against the dollar, making it the second-best performer among a
basket of 20 emerging market currencies after the Hungarian
forint on the day, as expectations euro zone finance
ministers would approve a debt bailout for Greece boosted global
risk appetite.
Trading volumes were thin, with U.S. markets closed for a
public holiday.
“It’s a very quiet afternoon due to the U.S. holiday and
because markets are waiting to see if the Greek bailout will be
agreed,” Informa Global Markets analyst Christopher Shiells
said.
“Hopes are high that a deal has been thrashed out and this
is what has been driving broader market sentiment and the rand
higher today,” he said.
On the debt market, the yield on South Africa’s benchmark
three-year bond dipped one basis point to close at
6.59 percent while the yield on 14-year paper fell 1.5
basis points to 8.215 percent.
“The market has adopted a wait-and-see stance pre-budget,
but if he (Gordhan) signals increased borrowing, bonds could
come under a bit of pressure. Offshore demand still remains
fairly strong though,” a Johannesburg bond trader said.
Foreigners bought a net 1.5 billion rand ($195.80
million)worth of South African debt last week, data from the JSE
securities exchange showed.
($1 = 7.6609 South African rand)
(Reporting by Stella Mapenzauswa; Editing by Susan Fenton)
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