JOHANNESBURG: South African government bonds fell on Monday, pulling back from a two-month high seen last week as traders prepared for a weekly bond auction, while the rand met resistance at the 6.65 area, close to recent highs.
Stocks were barely changed, consolidating gains after booking three straight week of gains last week, with BHP Billiton cruising higher on brokerage upgrade while Sasol dropped on lower oil prices. Government bond yields rose as much as 8.5 basis points in the session, bringing the yield on four year paper to a 7.74 percent close and that on the 2026 bonds to 8.68 percent on the Johannesburg Stock Exchange. "There's been a bit of profit taking which is taking place ahead of the auction, its a fairly big R186 auction," said Richard Farber, bond trader at World Wide Capital Securities.
The National Treasury is offering 1.5 billion rand ($225.7 million) of the 2026 bond, the most liquid of its longer-dated debt, and 600 million rand of the 2041 paper at Tuesday's sale.
Dealers said some players were making space for the extra supply.
On the currency front, the rand also traded softer in a quiet session but was not far off a three-month high seen last week and analysts expect further strength in the short term.
"You'll always get a couple of days of correction but the market itself is not overly long rand at the moment so any sort of correction that we see higher will probably be sold into again by real money people," said Warrick Butler, forex trader at Standard Bank.
The rand traded in a tight range of 6.6350 to 6.6650 to the dollar and was last 0.32 percent weaker at 6.6530 as of 1537 GMT. It closed at 6.6340 in New York on Friday.
RESISTANCE
The local corporate market dictated trade in Monday's session and as such good two-way interest kept the rand in the range.
If the rand is able to break through 6.65/6.60 resistance, the next level of resistance is seen at 6.55, the January 3 low, which should be quite a tough level to get to.
On the bourse, the JSE blue-chip Top-40 index inched up 0.11 percent to 29,594.79 points and the broader all-Share index edged up 0.02 percent to 32,814.43. "We had a strong rally since the middle of March and I think we are consolidating some of those gains," said Imara SP Reid trader Garth McKenzie.
Among equity movers, BHP Billiton topped the gainers' list on the blue chip index after the Credit Suisse upgraded the miner to outperform, citing low valuations.
Shares in the Melbourne-based company climbed 2.28 percent to 287.10 rand.
But Sasol, the world's biggest maker of motor fuels from coal or gas, was among the worst performers, falling 2.53 percent to 386.95 rand on faltering oil prices.
Vale's takeover target Metorex was 0.57 percent higher at 7.08 cents, well below the Brazilian miner's offer of 7.35 rand per share that values the base metals miner at $1.1 billion.
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