South Africa bonds fall in thin trade; shares rise

JOHANNESBURG: Yields on South African bonds rallied in afternoon trade on Wednesday, moving 20 basis points in an illiquid, jittery market that remains vulnerable to global developments, but prices ended virtually unchanged as the market stabilised at the close .

The rand extended losses but stayed in a familiar range and technical analysts expect the currency to remain stuck in that band as long as the euro/dollar pair holds its range.

South African stocks ended more than 1 percent higher.

Data showed South African inflation in July edged up to 5.3 percent, slightly higher than expectations of 5.2 percent, and left the market divided on whether the central bank will cut interest rates next month.

Bonds were firm early in the session but yields -- which move inversely to the price -- rose sharply in the afternoon, with the 2015 bond yield jumping 20 basis points as offshore accounts unpacking some stock caused a flurry of selling in thin trade.

The yield on the 2015 bond then bounced back to end 1 basis point higher at 6.68 percent on the JSE.

"It's all over the show at the moment. It seems this afternoon selling was pre-empted by some offshore selling into the local market and with liquidity being the way it is at the moment, it just forced a lot of guys to reduce exposure which caused yields to kick up," said Richard Farber of WWC Securities.

"The lack of liquidity saw the pick up to be quite aggressive," he added of the late afternoon activity which saw a lot of South Africa's tightly knit traders busy.

The 2026 bond yield ended at 8.115 percent, 1.5 basis points lower than Tuesday's close.

Strong US durable goods data boosted global risk appetite, reducing demand for fixed income and supporting equities, including South Africa's share market.

"US durable goods are saying that there is life in that economy despite all indications to the contrary so their bonds have gone south as well," said Ashley Dickinson, a bond trader for Renaissance BJM.

The rand extended losses to 7.2325 against the dollar by 1543 GMT, 0.85 percent weaker than its previous New York close at 7.1715.

STOCKS HIGHER

Stocks gained but the market's gains were capped by a drop in gold mining shares as the price of bullion tumbled more than 3 percent.

The JSE Top-40 blue-chip index closed up 1.36 percent at 26,281.14, after rising to a high of 26,558.57. The broader All-share index rose 1.18 percent to 29,604.59.

"The market had been kind of jittery ahead of Bernanke's speech until we saw some encouraging data about the US economy," a Johannesburg-based trader said.

Financial markets are awaiting a speech from US Federal Reserve chief Ben Bernanke on Friday for any signs the Fed might be ready to further stimulate the US economy. Emerging markets have benefited from excess liquidity in the United States, which has boosted fund flows to higher-yielding emerging market assets.

Shares of Growthpoint gained 1.09 percent to 18.60 rand after the property group said full-year profit rose 10 percent.

Allied Technologies jumped 3.51 percent to 59 rand after the technology group said it would buy Eyenza Mobile Money for an undisclosed amount.

Gold miner Gold Fields skidded 4.55 percent to 113.82 rand and rival Harmony fell 4.06 percent to 312.01 rand.

Copyright Reuters, 2011