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Bonds weaken in line with the rand

File photo
File photo

South African bond yields trended higher on Tuesday morning as they took direction from the weaker rand.

At 8.50am the benchmark R186 was at five week lows and was bid at 8.000% and offered at 7.990% from Monday’s close of 7.950%.

The middle-dated R207 was bid at 7.455% and offered at 7.450% from 7.415% previously.

The rand was at R12.1792 to the greenback from a close of R12.1443 previously.

Rand Merchant Bank analyst Deon Kohlmeyer said the local bond market initially tried to put on a brave face on Monday morning‚ but succumbed to portfolio outflows and an “ever-weakening” rand.

“It wasn’t long before the key 7.90% technical level was breached on the R186‚” Mr Kohlmeyer said.

At Tuesday’s auction‚ Treasury will be looking to place R850m each of the R2030 and R2037 as well as R650m of the ultra-long-dated R2048.

“This morning’s auction is again of crucial importance. Foreign selling ... has been negated to some degree by local purchases‚ especially if we consider how successful the recent switch auctions have been. Given the improved yields‚ there should be support for the auction but the market will react very negatively should client support not be there and the primary dealer panel of banks are left holding the can‚” said Mr Kohlmeyer.

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