* Bond market wary of over-supply
* Rand tracks debt market weaker against firm dollar
JOHANNESBURG, April 3 (Reuters) – South Africa’s rand
weakened against the dollar on Tuesday, partly tracking weaker
government bonds after a weekly auction was poorly received due
to investors’ concerns about over-supply of paper in the coming
month.
The yield on the three-year benchmark bond
gained five basis points to 6.725 percent while that for the
longer dated paper due in 2026 climbed eight basis
points to 8.43 percent.
“The sell-off was mainly on the back of the auction which
was poorly subscribed today,” said Richard Farber, a bond trader
at WWC Securities.
“April is generally a pretty poor trading month given all
the public holidays and guys are aware that you’ve got basically
three days before the next auction comes around.”
The weekly auction, in which 2.1 billion rand of the 2018
, 2036 and 2031 issue was on offer,
saw a lukewarm response from primary dealers, with the
short-dated paper attracting the highest bid-to-cover ratio at
2.62.
Citi said the poor performance in longer dated paper could
be linked to the Treasury’s switch auction programme commencing
in May, in which investors can opt to transfer their money from
soon-to-mature bonds into longer-term security instead of
cashing it in.
“Although this is not new, it may have led market
participants, real money investors in particular, to be
particularly cautious,” Citi said in a note.
The rand took its cue from the bond market, and was
down 0.59 percent on the day at 7.6950 by 1557 GMT compared with
Monday’s close at 7.65.
“The bond auction didn’t really go too well and we saw a
sell-off related to that. Also, the dollar itself has been
generally stronger today,” a Johannesburg currency trader said.
(Reporting by Stella Mapenzauswa; editing by Ron Askew)
