Today’s Market Update:
Bond Buyers Pounce at S. African Auction as Rates Decision Nears
By Colleen Goko
Demand climbed at a weekly auction of South African government bonds on Tuesday, with investors unable to resist yields at the highest level since December even as risks mount, including a looming interest-rate decision at a time when rand weakness is fueling inflation.
The eight primary dealers who buy bonds directly from the government placed orders for 8.84 billion rand ($591 million) of securities, or about 3.7 times the 2.4 billion rand of debt on sale. That was the most in four weeks, and compares with an average of 3.1 since March, according to Bloomberg calculations based on central-bank data.
But it’s still nowhere near the 16.3 billion rand of orders on Aug. 21, when benchmark yields were hovering around 9 percent, compared with 9.25 percent before Wednesday’s sale. That suggests investors are not yet convinced a sell-off in South African bonds and the rand have run their course.
Worries about a surprise rate increase on Thursday aren’t helping. While 16 out of 19 economists in a Bloomberg survey predict the South African Reserve Bank will hold rates at 6.5 percent, forward-rate agreements are pricing in a more-than-50 percent chance of a hike.
Read more on what the markets expect from the MPC later this week
The yield on 2026 government rand notes was little changed on Tuesday at 9.25 percent after rising 8 basis points yesterday. The yield has climbed 57 basis points since August 10, when Turkey’s currency crisis sparked a wide emerging-market sell-off that drove the rand to its weakest level against the dollar in more than two years.
|1 Year CMT||2.56%|
|1 Month LIBOR||2.164%|
|Fed Funds Effective||1.91%|
|Next FOMC Meeting||September 25-26th|
Economic Indicator Calendar
|09/18/2018||NAHB Housing Market Index||Sep||66||67||67|
|Total Net TIC Flows||Jul||$46.0b||$114.5b|
|Net Long-Term TIC Flows||Jul||-$36.5b|
|09/19/2018||MBA Mortgage Applications||Sep 15||-$1.8b|
|Current Account Balance||2Q||-$103.3b||-$124.1b|
|Housing Starts MoM||Aug||5.7%||0.9%|
|Building Permits MoM||Aug||0.5%||1.5%||1.9%|
|09/20/2018||Philadelphia Fed Business Out||Sep||15.8||11.9|
|Initial Jobless Claims||Sep 15||210k||204k|
|Continuing Claims||Sep 8||1705k||1696k|
|Bloomberg Economic Expectat||Sep||57.0|
|Bloomberg Consumer Comfort||Sep 16||59.0|
|Existing Home Sales||Aug||5.38m||5.34m|
|Existing Home Sales MoM||Aug||0.8%||0.6%|
|Household Change in Net Worth||2Q||$1028b|
|09/21/2018||Markit US Manufacturing PMI||Sep||55.0||54.7|
|Markit US Services PMI||Sep||55.0||54.8|
|Markit US Composite PMI||Sep||54.7|
|09/24/2018||Chicago Fed Net Activity Index||Aug||0.13|
|Dallas Fed Manf. Activity||Sep||31.0||30.9|