JOHANNESBURG, Sept 25 (Reuters) – South African government
bonds jumped on Tuesday as markets reopened after a public
holiday, while the rand firmed against the dollar, tracking a
general emerging market rally.
The yield on the three year benchmark closed six
basis points lower on the secondary market at 5.31 percent and
the yield on 14-year paper fell 14 basis points to 7.305
percent.
Yields were also sharply lower at the Treasury’s weekly
primary auction when it sold 2.1 billion rand ($257.15 million)
of its 2023, 2026 and 2048
paper, with bid-to-cover ratios coming in as high as 5.39.
“We had a holiday yesterday when there was no trade so we’re
playing a bit of catch-up. The currency is also a bit firmer
than it was when we left on Friday and U.S. Treasuries have
rallied as well,” said Daniel Sabiston, a bond dealer at Absa
Capital.
Demand was particular strong at the longer end of the curve.
“The people who are buying are typically offshore accounts
and if they have a bullish view on the market they tend to buy
(longer) duration bonds and that’s why the curve has flattened,”
Sabiston said.
The rand strengthened as much as 0.97 percent
against the dollar during the Johannesburg session before
retreating to 8.1941 by 1605 GMT, still up 0.6 percent from its
previous close.
It moved largely in tandem with a buoyant euro, the currency
of South Africa’s main trading partner, which firmed after the
European Central Bank defended its bond-buying plans aimed at
easing pressure on heavily indebted euro zone countries.
Demand for local debt has also been anchored by South
Africa’s imminent inclusion on Oct. 1 in the World Government
Bond Index (WGBI}, tracked by fund managers.
In its monetary policy statement last week, the Reserve Bank
said non-resident purchases of bonds, currently amounting to
nearly 75 billion rand since the start of the year, should
persist for some time as portfolios adjust to the WGBI
inclusion.
(Reporting by Stella Mapenzauswa; Editing by Susan Fenton)
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