S.African assets rise on commodity prices, PPI data

Thu Oct 28, 2010 4:42pm GMT

JOHANNESBURG (Reuters) - The South African rand and government bonds rallied on Thursday, still buoyed by the Finance Minister's budget speech on Wednesday and after tame producer price inflation raised the chances of an interest rate cut next month.

The resource-heavy local bourse ended nearly 1 percent higher, led by miners on stronger commodity prices.

The rand recouped earlier losses to trade firmer against the dollar in afternoon trade, tracking moves on the euro/dollar and after an initial selloff after Wednesday's medium-term budget speech wore off.

By 1519 GMT, the rand had gained 1.27 percent against the greenback to 6.9820, compared to its previous close of 7.0750.

"(The rand is) tracking the dollar at the moment ... we came off the 7.07 to 7.00. I think around the 7.0 figure and 6.95 will be bottom," a local currency trader said.

Yields on government bonds fell sharply as bonds extended their post-budget speech gains.

The 2015 yield was down 12 basis points at 7.105 percent. It fell to 7.07 percent in the session, a level last seen over a week ago. The yield on the longer-dated 2026 note gave up 7 basis points to 8.070 percent, after falling to a three-week low of 7.76 percent.

"The budget was fairly bond positive and I think with the PPI (producer price index) numbers coming in much softer than anticipated the guys have been scrambling for bonds," Richard Farber, a bond dealer at World Wide Capital Securities said.

Farber added that the curve had also steepened in anticipation of interest rate cuts in the short to medium term.   Continued...

<p>Mineworkers work underground at Harmony Gold Mine's Cooke shaft near Johannesburg, September 22, 2005. REUTERS/Mike Hutchings</p>
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