Bonds weaken slightly as market awaits risk events this week

South African bonds retained a weaker bias shortly before midday Monday morning, as investors braced for a spate international and local of economic data releases this week.

The dollar had remained under pressure after negative headlines in the US, which continued to cast doubt on the ability of the administration of US President Donald Trump to pursue its policy agenda, analysts said.

Data out of the US and the eurozone would remain closely watched, as investors attempted to gauge the pace of monetary policy tightening expected in 2017, analysts said.

Emerging markets had seen a good inflow of funds seeking yield from global investors recently, but locals had been net sellers, said TreasuryOne currency dealer Phillip Pearce.

The US Federal Reserve was set to meet later in the week, with a policy statement scheduled for release on Wednesday.

The Fed was widely expected to keep interest rates unchanged, with market odds of an increase in rates at 2.5% this week, from 5% last week, said Rand Merchant Bank analyst Isaah Mhlanga.

The Fed was expected to refrain from giving strong hints about potentially scaling back on its monetary stimulus programme, said Mhlanga. Substantial risk events from data including purchasing managers index (PMI) releases for both the UK and the eurozone, US GDP data, and local jobs data on Thursday, he said.

Eurozone composite PMIs disappointed on Monday, declining to 55.8 in July, below a consensus forecast of 56.2.

This seemed consistent with a view that economic growth would slow a little to 0.4% quarter on quarter in the third quarter, after 0.6% in the first quarter and 0.5% in the second quarter, said Barclays Research analysts.

At 11.30am the R186 was bid at 8.56% from Friday’s 8.50% and the R207 at 7.34% from 7.27%

The rand was at R12.9762 to the dollar from Sunday’s R12.9172.

© Business Day

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