RAND, JSE UP ON BONDS MOVE

THE SOUTH African assets recovered yesterday after the central bank launched a bond-buying programme, seeking to drum up demand in credit markets as the coronavirus epidemic weighs on the country’s already ailing economy.

At 5pm, the rand bid at R17.45 to the dollar, 17 cents firmer than at the same time on Tuesday, pulling back for a session best of R17.26 hit soon after the SA Reserve Bank’s announcement that it would purchase government bonds for an unlimited period.

The bank has long resisted public and political pressure to intervene more directly in providing stimulus. Yesterday’s move brings it into line with major central banks across the developed world running large-scale asset purchase programmes.

Bond markets in particular were buoyed by the announcement having suffered three sessions of heavy selling that pushed yields up to record highs.

At 4pm, the yield on the benchmark 2026 issue was down 70.5 basis points to 10.515 percent.

“The reduction in SA’s bond yields reflect some improvement in prices, but a full retracement in government bond yields to pre-crisis levels has not occurred yet,” Investec chief economist, Annabel Bishop, said in a note.

“The drop in yields today reflects some reduction in market uncertainty however.”

Indications that the US was poised to pull the trigger in $2 trillion (R35.1 trillion) stimulus package also aided riskier assets, as the potential flood of cheap money prompted investors who had liquidated holding to buy dollars to reconsider.

South Africa’s growing coronavirus infections, which reached 709 – from just over 500 a day earlier – as the country prepared for a lockdown starting midnight today, looked set to drag the economy deeper into recession.

Stocks firmed, backed by the return of risk appetite, with the JSE Top40 index as well as the broader all share index both up 5.17 percent, led higher for a second consecutive day by resources and financial companies. I Reuters