* Foreign demand strong at long-end of bond curve
* Traders cautious ahead of budget, deficit seen
JOHANNESBURG Feb 21 (Reuters) – The rand was steady
and government bonds edged up slightly on Tuesday, with market
players reluctant to take significant positions a day ahead of
Finance Minister Pravin Gordhan’s budget presentation.
Economists polled by Reuters expect Gordhan on Wednesday to
target a deficit of 5.4 percent of GDP for the 2012/13 fiscal
year from an estimated 5.3 percent in 2011/12 as the government
ramps up spending on infrastructure and social services.
But government bonds have held up well despite the
likelihood of increased issuance, partly supported by foreigners
attracted by higher South African yields that are much higher
than the near-zero rates in the United States and Europe.
The yield on the benchmark three-year bond was one
basis point lower at 6.59 percent in early Tuesday trade while
that on the 14-year issue dipped 1.5 basis points to
8.215 percent.
The Treasury was due to sell a total of 2.1 billion rand
($274.1 million) worth of the 2018, 2021 and
2041 bonds at a weekly auction closing at 0900 GMT.
“This year, non-residents have been particularly fond of
R208 scrip, with 7.4 billion rand worth of net purchases, which
has contributed to the proportionately greater compression of
yields at the belly of the yield curve,” Absa Capital said in a
note.
“We doubt this week will be any different in an environment
where risk is being added to portfolios and South African scrip
is still offering a relatively attractive pickup.”
Continued…
