JOHANNESBURG Aug 15 (Reuters) – South African bonds
weakened and yields edged higher on Wednesday after retail sales
data surprised on the upside, suggesting the Reserve Bank might
not need to cut interest rates further this year to stimulate
demand.
The rand gave up some ground against the dollar, reflecting
mainly the greenback’s broad-based gains as the market scaled
back hopes for further stimulus measures from the U.S. Federal
Reserve that would weaken the U.S. currency.
By 1636 GMT the rand traded at 8.2250 against the
dollar, down 0.33 percent from Tuesday’s close.
The yield on the heavily traded 14-year government bond
climbed 8.5 basis points to 7.575 percent while that
for the three-year bonds ended the day flat at 5.68
percent after reaching a session high of 5.735 percent.
“It looks like offshore accounts are only interested in the
shorter dates at the moment and locals are sitting out,” a bond
trader in Johannesburg said of the sell-off in longer-dated
paper.
“The lack of participation may be exaggerating the moves.”
Bonds extended losses after Statistics South Africa reported
that growth in retail sales accelerated to 8.3 percent
year-on-year in June, outpacing market expectations for a 4.7
percent expansion.
The data suggested that while the rate of expansion in
consumer activity would moderate in 2012, it would not be “sharp
or dramatic”, Stanlib analyst Kevin Lings said.
“It also suggests that there is less chance of a further
interest rate cut later this year,” he added.
Bond yields plunged to historic lows last month after
the Reserve Bank unexpectedly cut the benchmark repo rate to 5.0
percent, sounding a dovish policy tone that led the market to
price in another reduction before year-end.
(Reporting by Stella Mapenzauswa)
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