South African bonds ended weaker on Thursday despite United States data that should have resulted in bonds rallying.
At 16.22pm, the benchmark six-year R153 bond was at 9,710% from 9,650% at Wednesday’s close, 9,700% at Tuesday’s close, 9,580% at Monday’s close and a recent worst level of 10,29% on June 15.
Meanwhile, the five-year R194 bond was at 9,510% from 9,450% at its previous close, while the 11-year R157 bond was quoted at 10,095% after closing at 10,015% on Wednesday.
The rand moved weaker against the US dollar, last trading at R6,0763 after earlier touching R6,1165 to the greenback after closing at R6,0651 on Wednesday.
In late trade on July 8, the rand touched its best level this year when it reached R6,00.
“We should have rallied on both the US producer inflation and industrial production data, but instead we just drifted weaker. I guess we have a bad case of the summer doldrums and quite frankly nobody gives a damn,” commented a bond trader.
June US PPI was expected to edge up by 0,1% m/m after May’s large 0,8% m/m gain. The optimists pointed to the June import and export prices released on Wednesday, which showed m/m declines and believed that this should mean that June PPI should also show a m/m decline, which is what happened with a 0,3% m/m decline.
The US import price index fell by 0,2% m/m in June, defying market expectations for a gain for the month. The 1% m/m drop in imported oil prices pulled the headline index down. US export prices also fell. The 0,6% m/m decline for the month was the first drop since July 2003 and the largest decline since 2001.
AFX also reported that US June industrial production fell by 0,3% m/m after a 0,9% m/m gain in May. The index moved back below the pre-recession peak of 116,4 recorded in June, 2000. Capacity utilization fell to 77,2% in June from a revised 77,6% in May.
Economists had been expecting industrial production to remain unchanged and capacity utilization to increase to 77,7%.
In another report, the US Labour Department said layoffs in autos and other manufacturing industries pushed seasonally adjusted US initial jobless claims higher by 40 000 last week, to a total of 349 000.
The US Commerce Department said total business inventories rose 0,4% m/m, the ninth consecutive monthly increase, to a record $1,22 trillion in May.
Foreigners were net sellers of R759,229-million worth of South African bonds on Wednesday after net purchases of R369,749-million worth of local bonds on Tuesday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R27,301-billion on Wednesday from R82,667-billion on Tuesday. — I-Net Bridge