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Rand recovers in global emerging market bounce

Yields on government bonds fell sharply, reflecting strong prices, as the first weekly bond auction since South Africa’s exclusion the World Government Bond Index (WGBI) attracted strong demand.

South African rand.  Picture: Christa Eybers/EWN

JOHANNESBURG - The rand firmed on Tuesday, shaking off a batch of poor domestic data recently, as moves by several countries to ease coronavirus lockdowns lifted global risk appetite.

Yields on government bonds fell sharply, reflecting strong prices, as the first weekly bond auction since South Africa’s exclusion the World Government Bond Index (WGBI) attracted strong demand.

At 1520 GMT, the rand was 1.06% firmer at R18.3750 per dollar.

“After a dismal start to the week, markets are enthused by an easing in lockdown restrictions in various European and US epicentres,” RMB analyst Nema Ramkhelawan-Bhana said in a note.

"Alike to the market behaviour when US-Sino trade tensions reached boiling point, participants are clutching to any signs of optimism. The EM complex is a natural beneficiary of opportunistic trade, though there are exceptions."

US states California and New York on Monday outlined plans for reopening businesses, while several other countries including Spain, Italy, Turkey, India, and Malaysia also tentatively eased lockdowns.

In fixed income, the yield on the 10-year government paper fell 44.5 basis points to 9.755%.

The Treasury sold a total of R4.53 billion ($247.49 million) worth of its 2026, 2030 and 2032 bonds on Tuesday, with the bid-to-cover ratio on the 2030 bond rising to 8.3 from 4.7 last week.

“Now that the WGBI outflows are finally out of the way, investors can start trading bonds based on their fundamentals,” said fixed-income specialist at RMB Michelle Wohlberg.

South Africa lost its last investment-grade rating in March, forcing it to be excluded from WGBI on Thursday. That means some large overseas funds will no longer be able to hold the country’s debt.

Stocks ended flat, with the Johannesburg All-Share index unchanged at 49,184 points, while the Top-40 index inched 0.10% lower to 45,210 points.

The Top-40 was weighed down by gold stocks due to weaker bullion prices. Gold fell as easing lockdowns and oil recovery boosted appetite for risk.

Gold Fields closed 5.35% lower at R142.10, AngloGold Ashanti fell 4.76% to R455.09, while Sibanye Stillwater weakened 4.71% to R37.20.

EnX Group Ltd plunged 30.37% to R3.76 after it said the sale of its fleet management business, Eqstra, to Bidvest Group Ltd has fallen through after approval from the Prudential Authority (PA) failed to materialise before a deadline for the transaction.