South African bonds weak on auction

JOHANNESBURG: South African government bonds took a break from a sharp rally in the previous session.

Bonds gave up some gains and yields pushed higher as investors booked profit after a recent sharp rally that saw yields plummet to new lows until Monday.

An auction that closes at 0900 GMT is seen as weighing on the market as traders brace for the extra supply.

The Treasury has offered 2.1 billion rand ($291 million) in 15-year bonds and 25-year paper with results out after the auction closes.

"The bond market has weakened on the open in anticipation of this morning's auction, as well as profit taking from offshore names and some selling of bonds from real money accounts," said Daniel Sabiston, a bond trader at Absa Capital. The 2015 benchmark note yield has pulled back from a record low of 6.46 percent on Monday to add five basis points to 6.61 percent in Tuesday's session.

The yield on the 2026 paper added seven basis points to 8.015 percent by 0625 GMT.The central bank's leading indicator will be released at 0700 GMT and the market expects to see a further moderation with the June number, as economic signals point to weak domestic growth.

The JSE Top-40 blue-chip index was up nearly 1 percent before the start of stock trading at 0700 GMT after stocks managed to end higher on Monday on bargain-hunting.

Copyright Reuters, 2011