Bonds track slightly softer rand as focus remains on budget speech


SOUTH African government bonds were marginally weaker on Tuesday morning‚ but bond prices remained at two-year highs as investors closely watched the new administration of President Cyril Ramaphosa.

Speculation that Ramaphosa will reshuffle the Cabinet before the tabling of the budget on Wednesday has waned; Ramaphosa will host former president Jacob Zuma and the 35-member Cabinet at a dinner on Tuesday evening.

Reports have also suggested Ramaphosa will consult widely with the ANC’s strategic partners before any reshuffle‚ as he seeks to stamp his authority on the ANC and the state.

The budget on Wednesday will be the primary local market-moving event this week‚ as investors and ratings agencies gauge to what extent the government will rein in spending.

SA’s fiscal deficit is being closely watched by agencies‚ including Moody’s‚ as they consider the quality of SA’s debt.

On Monday‚ ratings agency Fitch revised SA’s growth outlook for 2018 upwards and‚ while warning that it remained low‚ said Ramaphosa’s ascension may help to reduce policy paralysis in the government.

“The new president has spoken in favour of fiscal discipline‚ but the main guidelines for the budget and much of the detailed work will likely have been prepared under Zuma‚” Fitch said.

Fitch’s statement‚, as well as broader support for emerging-market bonds, could limit any upward movement in local bond yields‚ said Sasfin Securities bond analysts.

Bond yields move inversely to bond prices.

At 9.30am the benchmark R186 bond was bid at 8.14% from 8.08% while the R207 was at 6.810% from 6.735%.

The rand was at R11.7226 to the dollar from R11.6722.

The yield on US 10-year treasuries was last seen at 2.9069% from 2.8777%.


Source: TMG Digital.

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