Emerging market rally boosts rand and bonds

THE rand and bonds were firmer today on the back of an emerging market rally that saw the rand briefly break through 8.30 resistance on investors’ hopes European leaders may find a plan to tame debt problems in the region.

But, with no complete resolution yet in sight, the global outlook remains uncertain.

The rand hovered above its next resistance level, trading at 8.31 to the dollar at 7am.

Central bank data showed reserves fell to $47.672 billion (R396bn) last month, possibly due to the stronger dollar.

Yields on government bonds were down with the firmer currency but may moderate with the announcement of Treasury’s switch auction plans for next week.

The 2015 yield dipped 1.5 basis points to 6.255 percent while the 2026 issue dropped three points to 8.26 percent.

The R186/R157 spread was down to 202 basis points, off a record 206 hit this week.

“The market saw opportune value buying of duration yesterday flattening the curve back to 202 basis points,” said Brigid Taylor of Nedbank.

The rally might not last because investors were still long on the 2015 bonds from the past two switch auctions, she said.

The Treasury announced last week that it would hold weekly switch auctions this year. – Reuters