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Send  Print  Share  RSS  Twitter  18 Jun 2009

SA Credit AM: Bonds Steady; Eye SARB Data

Johannesburg, Jun 18 (I-Net Bridge) South African bonds were little changed overnight ahead of the release this morning of key current account data.
By 08:40 the short-term government R153 bond was bid at 6.850% from 6.785% before. The medium-term R157 was at 8.260% from 8.265%, while the long-term R186 was bid at 8.805% from 8.790% before.
The rand was last at 8.0676 to the dollar from a previous close of 8.0455.
A local bond trader said the market was very thin, as players await the current account data.
"We are pretty much range bound, waiting for the data. If the current account deficit is wider than expected, I think bonds will drift back up a point or two," he said.
He added that the only other scheduled event of note for the market was the TCTA`s 100 million rand WS04 issue.
The Reserve Bank is due to release its latest quarterly bulletin at 11:00 this morning, containing important data on the expenditure side.
Service and income payments to the rest of the world and a large trade deficit are set to continue to weigh on South Africa`s balance of payments as a first quarter deficit of -5.9% on the current account is being pencilled in by the market.
I-Net Bridge`s Econometer shows that seven leading economists vary in their views from a deficit of -4.8% to -6.3% for the first quarter from the -5.8% of the fourth quarter last year and the -8.8% seen a year earlier.
One of the economists in the survey pinpoints the "main culprit" for the higher print as service and income payments to the rest of the world, which measured almost double the nominal deficit in the fourth quarter of last year, as did the trade account.
The deficit is to be "inflated" by the worst trade deficit on record in January this year of 17.4 billion rand.
However, the good news is that according to economists, some easing in the deficit could be seen in 2009 after the dastardly deficit of -7.4% of 2008.
This trend should be supported by weaker domestic demand and a possible cooling in dividend payments to foreigners as company earnings come under pressure.
Absa Capital said in its morning report that although last month`s supply- side GDP estimates showed that the economy slipped into a recession, contracting 6.4% q/q annualised, the QB will provide detailed information on the pressures faced by households in an environment where high debt levels and falling real incomes have placed tremendous strain on consumer outlays during
Q1 - this despite the 200bp in interest rate cuts between December 2008 and March 2009.
"The economic contraction, which contributed to the Q1 09 22.1% q/q contraction in manufacturing activity and rise in manufacturing capacity under- utilisation rates, are also likely to see fixed investment growth outside of the public sector slow significantly in Q1 09.
"However, the market`s main focus is likely to be on the current account deficit - we expect the deficit to have deteriorated marginally to 5.9% of GDP from 5.8% in Q4 08. The data will also give us an indication of how much of the financing was from resurgent portfolio inflows and corporate action in the mining sector, and how much still relies on `other` inflows," the analysts said.
Foreigners were net sellers of 4.150 billion rand worth of South African bonds including repo transactions on Wednesday after net sales of 157.710 million rand worth of local bonds on Monday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was 8.783 billion rand on Wednesday from 8.858 billion rand on Monday.
Markets were closed Tuesday for the Youth Day public holiday.
Foreigners were net buyers of 403.326 million rand worth of South African bonds, excluding repo transactions, on Wednesday after net sales of 979.958 million rand worth of local bonds on Monday.
On a year to date basis, foreigners have been net buyers of 12.125 billion rand worth of local bonds, excluding repo transactions.
On a year to date basis for total transactions, including repo transactions, foreigners have been net sellers of 18.188 billion rand.
08:40 local time Range so far Previous
(06:40 GMT) Close
R153 (2009/11) 6.850% bid 6.785-6.905 6.785%
R157 (2015) 8.260% 8.260-8.290 8.265%
R186 (2026) 8.805% bid 8.795-8.825 8.790%
Bond Exchange of South Africa (in billions of rand)
Monday Wednesday
Nominal cumulative volume 8.858 8.783
Net foreign purchases/(sales) (0.158) (4.150)
Net foreign purchases/(sales) in 2009: (18.188) billion rand
Net foreign purchases/(sales) in 2008: (40.729 billion rand)
Net foreign purchases for 2007: 6.594 billion rand
Net foreign purchases for 2006: 30.008 billion rand
Repo rate: 7.5%
By Jacqueline Mackenzie
I-Net Bridge.
Copyright 2009 I-Net Bridge. All Rights Reserved.

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