Bonds weaken despite firmer rand‚ as Cabinet reshuffle rumours linger

South African bonds remained weaker shortly before midday on Friday‚ failing to track a firmer rand amid profit-taking‚ and concern over possible further domestic political ructions.

Friday’s confirmation by the ANC that presidential hopeful Nkosazana Dlamini-Zuma would be sworn as a member of parliament gave credence to some of the speculation around a possible Cabinet reshuffle‚ and at the very least confirms that the president is surrounding himself with more loyalists‚ said Sasfin Securities Bond analysts.

Ratings agency Moody’s on Wednesday begins its 12th annual sub-Saharan Africa summit in Johannesburg and could also prompt some market-moving comments‚ analysts said.

Rand Merchant Bank analyst Gordon Kerr said the strength seen in bonds on Friday was a function of investors taking long positions before the weekend.

Despite rumours of a reshuffle at the weekend‚ it looked unlikely that the Treasury would be touched ahead of the ANC’s December elective conference‚ said Kerr. With regard to the credit rating agencies‚ Rand Merchant Bank’s base case was still for a local currency downgrade in 2018‚ and a potential reshuffle should not change that‚ he said.

At 11.30am on Monday‚ the R186 government bond was bid at 8.435% from Friday’s 8.38% and the R207 was at 7.12% from 7.065%.

The rand firmed to R12.8913 to the dollar from R12.9651.