JOHANNESBURG Feb 9 (Reuters) – South Africa’s rand
held firm against the dollar on Thursday but government bonds
retreated as investors priced in the chance of interest rates
rising by year-end, with most of the selling coming at the
shorter end of the curve.
The yield on the three year benchmark added 2.5
basis points to 6.605 percent, its highest since Jan. 27, and
that for the longer-dated 2026 issue rose 3.5 basis
points to 8.265 percent.
“From our perspective the short end of the local curve was
comparably a bit overbought in previous weeks and that bias has
held for some time now, especially as we see rate hike
expectations starting to gain some traction,” ETM market analyst
Sean McCalgan said.
However, the selling was offset by continued demand from
foreign investors attracted by higher yields on the local market
relative to overseas rates.
“From what we’ve seen recently there’s still been a positive
impact from foreign investors. Certainly the portfolio flows
data shows bonds inflows are still a lot more healthy than
equity flows, even though the equity market has been rising
quite steadily,” McCalgan added.
The debt market is pricing in a chance that the central bank
might start hiking rates from the last quarter of 2012 or early
2013 after keeping them steady for the past year.
By 0653 GMT the rand was up 0.14 percent at 7.5441
against the dollar, within sight of Tuesday’s five-month high of
7.52.
It took its cue from the euro, the currency of South
Africa’s main trading partner, which hit a two-month high on
hopes that Greece was inching closer to a debt bailout deal.
Concerns that Greece and other European countries might
default dented risk sentiment last year, hitting emerging
markets. The rand lost 23 percent against the dollar but has
clawed back nearly 7 percent of its value this year.
(Reporting by Stella Mapenzauswa; Editing by Ed Cropley)
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