Weaker rand and socio-economic uncertainty weigh on bonds

The South African bond market was weaker on Thursday morning due to the rand‚ which had depreciated to more than R11 to the dollar‚ and socioeconomic uncertainty‚ which analysts say was not inspiring foreign confidence in the domestic economy.

A broadly firmer dollar was the main reason the local currency lost ground against the major currencies in early trade. Rand Merchant Bank (RMB) said in a note that the clashes that took place between police and African National Congress (ANC) supporters attempting to confront a Democratic Alliance (DA) march on Wednesday had affected investor confidence.

"The aggressive undertone that marked the engagement between the DA and ANC supporters in Johannesburg on Wednesday couldn't have inspired confidence in foreign investors‚" the bank said.

"With the local bond market very dependent on continued foreign inflows to keep it from weakening meaningfully‚ the political environment may pose a significant challenge in securing these flows."

At 9:21 am‚ the longer-dated benchmark R186‚ due in 2026‚ was bid at 8.740% and offered at 8.725% from 8.705% at Wednesday's close. The shorter-dated R157‚ redeemable in 2015‚ was bid at 7.13% and offered at 7.12% from its previous close of 7.10%. The intermediate R207 bond‚ due in 2020‚ was bid at 8.32% and offered at 8.29% from its previous close of 8.27%.

The rand was trading at R11.0509 to the dollar from its overnight close of R10.9962.

Foreigners were net sellers of R189.662-millon South African bonds on Wednesday after net purchases of R595.936-million on Tuesday‚ data from the Johannesburg Stock Exchange showed. – I-Net

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