* Bonds yields down, relief after switch auction
* Govt swaps nearly 6 bln rand into 2026 and 2041 paper
* Rand recovers as risk aversion declines
JOHANNESBURG, June 14 (Reuters) – South African government
bonds ended firmer on Thursday, reversing earlier weakness with
the market relieved after a smaller-than-expected switch auction
and as global risk aversion abated and the rand came off its
worst levels in the afternoon.
The three-year yield hit a fresh record low of
6.14 percent and dealers say there is scope for the yield to
pull lower as rate cut expectations start to build.
The 14-year paper was at 8.22 percent while the
longest-maturity 2041 yield dropped to a 5-week low as supply
pressures lifted.
Government switched close to 6 billion rand ($712.53
million) of the 2014 bond, compared to an initial
guidance of 10 billion rand, into the 2026 and 2041 paper as it
rolls over soon-maturing bonds into longer-dated bonds.
Only two billion rand was switched into the 2041 bond at the
tail end of the yield curve.
Dealers had been concerned about the amount of stock on the
back end of the curve, which, together with expectations of
lower interest rates, had pushed the R186/R157 spread to a
record 209 basis points.
Continued…
