South African bonds rally on new bond buyback programme

By Reuters News

JOHANNESBURG, Oct 21 (Reuters) - South African bonds rallied on Wednesday after the government unveiled plans to cut weekly fixed-rate bond auctions and launch a bond buyback programme, while the rand was little changed following the announcement of two months of fuel price relief.

  • The benchmark 2035 government bond rallied strongly, with its yield falling 14.5 basis points to 8.59%, while the rand was steady at 16.3775 per dollar at 1350 GMT

  • The National Treasury said it would reduce the amount of fixed-rate bonds it sells every week and launch a bond buyback programme, part of efforts to show fiscal discipline and bring down debt levels

  • "The reduced supply, together with the new buyback programme, probably helps explain the positive bond-market reaction," said Bureau for Economic Research chief economist Lisette IJssel de Schepper

  • Finance Minister Enoch Godongwana announced two months of additional fuel price relief in a mid-year budget speech, saying it would cost 10 billion rand ($608.99 million) in forgone revenue

  • South Africa imports most of its fuel, making it exposed to swings in global energy prices

  • South Africa's inflation ZACPIY=ECI and retail sales ZARET=ECI rose 4.5% and 3.3% year-on-year, respectively, the statistics agency said on Wednesday

  • Johann Els of PSG Financial Services said the central bank's rate hikes in May and September should be sufficient for now, though the sharp increase in fuel prices in October poses a risk of broader inflationary spillovers.

  • On the Johannesburg Stock Exchange, the Top-40 index .JTOPI was last down 0.4%.

Capital.com is an execution-only brokerage platform and the content provided on the Capital.com website is intended for informational purposes only and should not be regarded as an offer to sell or a solicitation of an offer to buy the products or securities to which it applies. No representation or warranty is given as to the accuracy or completeness of the information provided.

The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.

To the extent permitted by law, in no event shall Capital.com (or any affiliate or employee) have any liability for any loss arising from the use of the information provided. Any person acting on the information does so entirely at their own risk.

Any information which could be construed as “investment research” has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.