/ 1 June 2011

SA government bonds firm on demand

South African government bonds firmed on Wednesday, taking yields on the longer-dated bonds to multi-month lows due to hefty offshore demand.

Purchasing Managers Index data showed the key manufacturing sector was enduring a bumpy recovery from a 2009 recession, and the uncertain outlook also boosted bonds.

The rand was also firmer on the day, trading at 6.7840 to the dollar, 0.47% stronger than Tuesday’s New York close of 6.8161.

Earlier, it hit a fresh three-week high of 6.7720.

Bonds weakened in the previous session after stronger-than-expected GDP data that hardened the case for interest rates to start rising before year-end.

“Yesterday the GDP numbers spooked the market but as we opened this morning the bulls came back and guys are looking for stock again,” said a local bond trader.

“It appears that the offshore interest is still there and the R186 is the stock that is in demand.”

The yield on the 2026 bond plunged as much as 15.5 basis points to a near five-month low of 8.365% before coming back to 8.38%.

The yield on the 2015 bond fell 11.5 basis points to 7.425%.

Government bonds have continued to enjoy strong foreign investor demand, attracting R21.3-billion so far this year, compared to R28.8-billion same period in 2010. — Reuters