JOHANNESBURG Oct 17 (Reuters) – South African government
bond prices rose on Wednesday after a well-received weekly
auction and as the market speculated the government will tighten
spending after two ratings downgrades.
Bonds also tracked the rand currency, which rallied more
than 1 percent in line with a stronger euro after Spain avoided
a ratings downgrade by ratings agency Moody’s, which would most
likely have triggered selling of Spanish bonds.
Local assets, however, remain vulnerable to a swing in
sentiment as investors fret about wildcat strikes that have hit
South Africa’s mining sector, with companies reporting heavy
losses in production since August.
But on Wednesday the yield on the three-year government bond
closed five basis points lower at 5.36 percent and
that for the longer dated 14-year paper shed 12.5
basis points to 7.61 percent.
“After the success of yesterday’s weekly bond auction,
renewed interest in South African bonds from offshore, coupled
with a stronger rand, has seen yields move lower across the
board today,” said Steve Arnold, a bond trader at Investec.
“One would have to wait for next week, when we have
inflation out on Wednesday and more importantly the midterm
budget speech on Thursday to give us some guidance as to how the
government finances are looking at the end of the first
half-year. That will drive us forward thereafter.”
Finance Minister Pravin Gordhan hinted to parliament earlier
this week he would rein in spending in next week’s midterm
budget, which he will present in the wake of ratings downgrades
for South Africa by both Moody’s and SP.
“We do not expect major adjustments to the Treasury’s
issuance plans in the 2012 medium term budget policy statement,”
Bank of America Merrill Lynch analyst Matthew Sharratt said.
The rand hit a 1-1/2 week high of 8.5772/dollar and
was at 8.5975 by 1729 GMT, up more than 1 percent from Tuesday’s
New York close.
(Reporting by Stella Mapenzauswa; Editing by Hugh Lawson)
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