South African bonds were weaker late on Wednesday in line with a substantially weaker rand‚ in the wake of the much-anticipated 2016-17 budget speech.
At 3.54pm‚ the benchmark R186 bond was trading at 9.29% from a close of 9.14% the previous day.
The middle-dated R207 was trading at 8.825% from a close of 8.685% previously.
ETM Analytics’ market analyst Ricardo da Camara‚ said bonds started weakening as Finance Minister Pravin Gordhan started his budget speech.
The rand weakened from about R15.30 to the dollar to close to R15.60‚ in line with bonds selling off‚ he said.
“There was some talk in the market that National Treasury was going to increase local bond issuance‚ but
Treasury is actually going to cut back on local issuance‚ which is positive for bonds‚ as the supply of bonds would diminish‚” Mr Da Camara said.
The fact that bonds were still weakening indicated that the budget speech did not satisfy market expectations‚ he said. Investors were expecting a bigger deficit eradication and the fact that the proportion of debt to gross domestic product was set to increase from 49% to about 51%‚ was not good from a rating’s perspective‚ Mr Da Camara said.
“SA is now more likely to get a junk rating‚ and therefore we are seeing the weakening in bonds‚” he said.
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