* Bonds dragged down by rand, coupon payments should support
* Rand at 1 week low vs dollar, outlook positive
By Xola Potelwa
JOHANNESBURG, March 6 (Reuters) – The rand fell
against the dollar on Tuesday, reflecting weakness in emerging
market currencies as investors fret about the euro zone debt
crisis and global growth, driving government bond yields to
one-month highs even after a strong debt auction.
The short to medium term outlook for the currency and bonds
was seen as positive, however, as carry trades are expected to
support the high-yielding rand while March bond coupon payments
should find their way back to cushion the debt market.
The government benchmark 2015 bond yield added 3
basis points to 6.71 percent while the 2026 yield
climbed 2.5 basis points to 8.315 percent, levels last seen
towards the end of January.
“Euro weakness and subsequent rand weakness has pushed
yields to three-week highs, (however) March is a big coupon
month which should support in the weeks ahead,” said Steve
Arnold, a bond trader at Investec Bank.
Yields on government bonds sold at auction earlier on
Tuesday fell after the sale as secondary market demand pushed
prices higher, especially on the 2021 bond, which
attracted bids worth four times the amount of debt on offer.
“Seen in the context of a relatively quiet market, the
strong result is quite positive. We believe fiscal data has
supported a bond-bullish view, though it has not really come
through in general price action yet,” Leon Myburgh, sub-Sahara
strategist at Citi bank in Johannesburg, said in a note.
Continued…
