Signs of weak global growth boost SA bonds

SOUTH African bonds traded near record highs today, supported by signs of weak global growth that could cause investors to shift money into higher yielding emerging markets.

The rand broke through resistance of 9.20 to the dollar to trade at its strongest levels so far this week. However, dealers expect it will struggle to make significant gains.

The yield on the 2026 benchmark bond was at 6.79 percent, not far off a record 6.77 percent hit in the previous session.

The 2015 yield, a benchmark for the front end of the curve, traded at 5.225 percent, 2.5 basis points off a twomonth low of 5.20 percent touched yesterday.

The rand which has failed to make a convincing breakthrough 9.30 support levels, rebounded to 9.1851 early today, a level last seen on Friday.

Christopher Shiells of Informa Global Markets, said: “The rand has been supported by bond inflows, but with the euro expected to remain under pressure on ECB rate cut speculation, it may struggle to see a major upside, especially as domestic fundamentals are not supportive of gains.”

The rand has come under pressure due to worries that Eskom may resort to rolling blackouts to prevent a crisis in a power supply operating on razor-thin margins. A power crisis in 2008 caused mines and factories to shut, costing the economy billions of dollars in lost output. – Reuters