Bonds go sideways after brief CPI joy
July 29, 2009
By Evan Pickworth
South African bonds reverted to a sideways trend during the late afternoon on Wednesday after receiving a five basis point fillip on a better-than-expected CPI print in the late morning.
By 16:02 the short-term government R153 bond was bid at 7.685 percent from 7.705 percent at it previous close.
The medium-term R157 was at 8.530 percent from 8.570 percent at the previous close and 8.550 percent at 10.59pm, just before the CPI release, while the long-term R186 was bid at 8.960 percent from 9.030 percent before.
The rand was bid at R7.8670/$ from a previous close of R7.8500/$.
"The market was strong after the CPI, but is moving sideways now," said a local bond dealer.
He said the next key event would be the PPI release on Thursday.
The increase in South Africa's consumer price index (CPI), which is used by the South African Reserve Bank for its inflation target, was up 6.9 percent year-on-year (y/y) in June from 8.0 percent y/y in May, Statistics South Africa said on Wednesday.
CPI was up 0.4 percent month-on-month (m/m) after increasing 0.4 percent in May.
Consumer inflation was expected to have receded to 7.2 percent y/y in June, according to a survey of leading economists by I-Net Bridge.
Forecasts among the 10 economists surveyed ranged from 6.9 percent to 7.3 percent.
Market analysts said the CPI data would be keenly monitored by the bond market for direction on interest rates ahead of the next MPC meeting on August 13.
Some analysts have said that another cut in interest rates could transpire, possibly when Gill Marcus takes over from November.
Forecasts among the 10 economists surveyed ranged from 6.9 percent to 7.3 percent.
South Africa's producer price index (PPI) is expected to have registered deflation of -3.4 percent year-on-year (y/y) in June from the 3.0 percent y/y seen in May, a survey by I-Net Bridge has found.
This will be the tenth consecutive decrease in producer price inflation after the 19.1 percent peak seen in August last year.
Forecasts among the 11 leading economists surveyed ranged from 2.1% y/y to 5.1% y/y.
Foreigners were net buyers of R1.152-billion worth of South African bonds including repo transactions on Tuesday after net purchases of R258.955-million worth of local bonds on Monday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was R104.654-billion on Tuesday from R8.962-billion on Monday.
Foreigners were net buyers of R1.131-billion worth of South African bonds, excluding repo transactions, on Tuesday after net purchases of R311.743-million worth of local bonds on Monday.
On a year-to-date basis, foreigners have been net buyers of R12.521-billion 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 R9.096-billion.
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