SA bonds weighed by global risk

resilience in an uncertain global environment that saw commodity prices fall and investors refrain from holding risky assets.
Analysts however, say if the risk-averse environment continues, the commodity-aligned rand currency should also start coming under pressure.
The JSE’s blue chip Top-40 March futures contract was down 0,87 percent before the start of trade, suggesting the local bourse would open lower after hitting a three month low in the previous session.
The earthquake in Japan could also hurt shares.
A rating agency downgrade of Spain reignited euro zone debt concerns and disappointing economic data from China as well as the United States on Thursday heightened global growth worries. Bonds, unlike the rand, are already feeling the pressure of the diminished investor appetite for risk and analysts say as long as risk remains elevated, there is further scope for bond weakness.
The yield on the longer-dated 2026 government bond climbed 4.5 basis points to 9.045 percent, compared with a close of 8.985 on the JSE on Thursday. The 2015 bond yield rose 3.5 basis points to 7.915 percent. It closed at 7.87 on Thursday.
“Yields have kicked up from where we closed yesterday. It seems to be general risk aversion happening in the market largely on the back of the Middle Eastern region as a whole, and the re-emerging European debt problems,” said Richard Farber, bond trader at World Wide Capital Securities.
“I think this is going to continue for a while, we expect a further sell off to continue once the foreigners come into the market,” Farber added.
Some dealers expect the four-year paper to target the 8.0 percent level. The last time the yield traded that high was at the end of June 2010, according to Reuters data.
The rand was steady at 6.92 to the dollar as of 0656 GMT, compared to a close of 6.9225 in the previous session.
Dealers see the currency testing the higher end of its 6.93/6.85 technical range for most of the session, also weighed by investors running away from risk.
The 6.85 level remains a tough area of resistance for the rand and the currency is seen trading further away from it in coming sessions. – Reuters.