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Gentle downward trend looks set to conti... |
Gentle downward trend looks set to continueTHE upward blips of the past few weeks were but a dim and distant memory in the bond market as the yield on the medium-dated R150 raced tantalisingly towards the "psychological" 13% level again. Unfortunately rugby, cricket and the promise of a fine weekend in Johannesburg left the rate at around 13.07% at close of business on Friday. In the absence of any bad news the bond market looks set to sustain its gentle downward trend. The long dated R153 (12 years to maturity) is now trading about 31 basis points above the R150 (seven years to maturity) which makes it much more interesting to print out yield curves these days. That gap is expected to widen further which should suggest that trading interest will move to the R153 from the relatively expensive R150 in the future. The treasury's new baby, the R186 (28 years to maturity), has yet to appear but is expected to prove popular with foreign buyers who will almost certainly lock it away in a drawer. Don't expect too much liquidity from this one. The over the counter bond options remain dull with few players seeing any good reason to waste money on premium payments. Just a week to go before primary dealers get to use their finely honed market-making skills for real. One of the reasons given for wanting to become a primary dealer is "to see the flows". Given the popularity of the movie Titanic maybe that should read "to see the floes". Time will tell.
David Bullard
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