* R186/R157 spread drops to two-month low
* June inflation data due at 0800 GMT
* Retail sales number at 1100 GMT
JOHANNESBURG, July 18 (Reuters) – South African government
bond yields tracked lower on Wednesday, pushed down by more
offshore buying and domestic market expectations of a moderation
in inflation that may allow the central bank room to cut
interest rates this year.
The rand was slightly weaker at 8.1872/dolar at
0630 GMT compared to a 8.1685 close in New York, and dealers
said it would trade in a 8.16-8.24 range ahead of a central bank
interest rate decision on Thursday.
The yield on the benchmark 2026 bond dropped to
7.41 percent, its lowest since January 2009, while the
three-year and nine-year bonds were close to
Tuesday’s record lows at 5.68 percent and 6.765 percent
respectively.
The yield differential between the two benchmarks – the
R186/R157 spread – narrowed to 170 basis points, levels last
seen two months ago, as offshore pension funds showed a
preference for the higher-yielding back end of the curve.
Adding to the rally in the long-maturity bonds is
government’s cancellation in the past two weeks of its weekly
switch auctions, where it exchanges paper maturing in two years
for bonds at the longer end of the curve.
The move has caused a relief rally at the longer end, which
was previously weighed by oversupply concerns.
Continued…
