S.Africa rand, govt bonds firm slightly

JOHANNESBURG (Reuters) - South Africa's rand and government bonds were steady early on Friday with investors choosing to stay on the sidelines until a clear domestic economic picture emerges, including from an interim budget due next week.

The rand was at 8.6450 at 0641 GMT, marginally firmer within its two-day range. It closed at 8.6520 in New York on Thursday.

The unit may stay stuck around the 8.54-8.60 levels in this session as investors await a clearer picture out of domestic labour unrest in the mining sector.

Gold Fields, the world's fourth biggest gold producer, said striking workers at its KDC West operations in Carletonville, 40 km (25 miles) west of Johannesburg, have returned to work, ending a month long strike.

However, 4,000 workers downed tools at Lonmin's troubled Marikana platinum mine once again on Thursday in protest at the recent arrest of three colleagues.

"While on the one hand, Goldfield workers have resumed work and Kumba Iron Ore has resumed production, our sense is that the labour situation remains tense," said Mike Keenan, a forex strategist for Absa Capital.

"And with two key South Africa-specific events in the pipeline and a fragile macroeconomic backdrop to boot, we still feel that the rand offers limited value at current levels."

Investors are waiting on Finance Minister Pravin Gordhan's Medium Term Budget Policy Statement (MTBPS) on Thursday, which will signal to the bond market how much the government plans to borrow over the coming months.

The ruling ANC also holds an internal leadership election in December, leaving investors guessing about the possibilities of policy change in Africa's largest economy.

Yields on government debt edged lower to 5.39 percent on the 2015 note and 7.575 percent on the 2026 issue.

The yield differential between the two benchmarks narrowed from Tuesday as the long end outperformed the front. The R186/R157 spread closed at 218 basis points on Thursday compared with a life-time high of 237 basis points on Monday.

So far in early Friday trade the spread has held at 218 basis points.

"The front has underperformed. There is big end-user buying of R186's so that has kept market-makers on their toes and needing to cover," said Richard Farber of Worldwide Capital.

Treasury will sell a total of R800 million rand of inflation-linked bonds spread between the I2025, I2038 and I2050 issues at 0900 GMT. The longer bonds are expected to clear at better than market levels.

Source: http://news.yahoo.com/africa-rand-govt-bonds-firm-slightly-070629192--finance.html

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