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Government bond yields fell sharply, reflecting strong prices, as the first weekly bond auction since South Africa’s exclusion from the World Government Bond Index (WGBI) attracted strong demand.
South African Rand. Image: Christa Eybers / EWN
JOHANNESBURG – The rand reaffirmed on Tuesday, recently shaking off a batch of poor internal data as multi-country measures to alleviate coronavirus blockages raised appetite for global risk.
Government bond yields fell sharply, reflecting strong prices, as the first weekly bond auction since South Africa’s exclusion from the World Government Bond Index (WGBI) attracted strong demand.
At 1520 GMT, the rand was 1.06% firmer at R18.3750 per dollar.
“After a grim start to the week, markets are excited about the easing of closure restrictions in several European and US epicenters,” RMB analyst Nema Ramkhelawan-Bhana said in a note.
“Like market behavior when trade tensions between the United States and China reached a boiling point, participants cling to any signs of optimism. The EM complex is a natural beneficiary of opportunistic trade, although there are exceptions.”
The states of the United States, California and New York on Monday outlined plans to reopen businesses, while other countries, including Spain, Italy, Turkey, India and Malaysia, also tentatively eased the blockades.
In fixed income, the yield on the 10-year government document fell 44.5 basis points to 9,755%.
The Treasury sold a total of R4.53 billion ($ 247.49 million) of its 2026, 2030 and 2032 bonds on Tuesday, with a 2030 bond bid / hedge ratio increasing to 8.3 from 4.7 last week.
“Now that WGBI exits are finally out of the way, investors can start trading bonds based on their fundamentals,” said Michelle Wohlberg, fixed income specialist at RMB.
South Africa lost its last investment grade rating in March, forcing it to be excluded from the WGBI on Thursday. That means that some large foreign funds will no longer be able to retain the country’s debt.
Stocks ended unchanged, with the Johannesburg All-Share Index unchanged at 49,184 points, while the Top-40 index rose 0.10% lower to 45,210 points.
The Top-40 was overwhelmed by gold stocks due to weaker bullion prices. Gold fell as locks eased and the oil recovery increased risk appetite.
Gold Fields closed 5.35% lower at R142.10, AngloGold Ashanti fell 4.76% to R455.09, while Sibanye Stillwater weakened 4.71% to R37.20.
EnX Group Ltd fell 30.37% to R3.76 after it said the sale of its fleet management business, Eqstra, to Bidvest Group Ltd failed after Prudential Authority (PA) approval failed to materialize before the closing date for the transaction.
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