South African bonds moved about six basis points weaker across the curve in morning trade on Thursday, given direction by a softer rand and amidst general caution ahead of the release of the June Unied States producer price index (PPI), due at 14.30pm local time.
At 11.55am, 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 10,07% after closing at 10.,015% on Wednesday.
The rand moved weaker against the US dollar, last trading at 6,1113 to the greenback after closing at 6,0651 on Wednesday. The range over the morning was 6,0550 to 6,1165. In late trade on July 8, the rand touched its best level this year when it reached 6,00.
“We’ve seen some selling on the back of the rand and some nerves ahead of the PPI,” commented a bond trader. “But volumes have been pretty thin. If the data turns out to be better than expected, we could see a rebound later this afternoon.”
June US PPI is expected to edge up by 0,1% m/m after May’s large 0,8% m/m gain. The optimists point to the June import and export prices released on Wednesday, which showed m/m declines and believe that this should mean that June PPI should also show a 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.
Foreigners were net sellers of R759,229-million rand worth of South African bonds on Wednesday after net purchases of R369,749-million rand 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