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Some fly and some fall in stock market's... The bond market gets shaken and stirre... |
The bond market gets shaken and stirredTHE bond market experienced perhaps its worst week in living memory, with rates roaring up from the previous Friday's already bearish close of 14.05% to 14.44% on Monday. From then on it became a frightening rollercoaster ride with Tuesday's trading seeing the R150 rise to a high of 15.59% before falling back to 15.00% within the hour. The underlying market volatility pushed up the price of options, and although there were plenty of buyers scrambling to cover their open positions, there were relatively few people who were willing to write in such volatile conditions. Quite why the reaction in the bond market was so severe puzzled many people. After all, in the US market the trend was for sellers of equities to seek refuge in bonds. Unfortunately, we are still classed as an emerging market and it appears that foreign investors, weary of Asian losses, decided to reduce their exposure to emerging markets when the Hong Kong market showed signs of strain. The result was that foreigners probably sold around R4-billion of the R18.5-billion in bonds they have bought this year. As every seller needs to find a buyer, the selling pressure depressed the market and rates seesawed as a result. It has been a week in which only a brave man or a fool would have predicted the next movement in bonds. Towards the weekend the R150 settled back to the 14.55% level in late Friday trade. Where to next is anybody's guess. David Bullard
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