Compiled by Richard Favis
RBC Capital Markets
+27 11 784 5065
Following last week's expected interest rate cut both the currency and bond markets have weakened. Bonds should consolidate at current levels ahead of next week's major data releases while the rand is under pressure from a firmer dollar.
Next week several data reports will be released including the crucial July consumer inflation and producer inflation figures which should offer fresh direction to the bond market.
Also expected to give direction are the coupon flows on the governments most liquid bonds and the news that around R6bn of corporate debt will be entering the local bond market in the next few weeks.
About R12.8bn in coupon flows are due at the end of the month. However some market participants are downplaying the effect this will have on the market as most of the funds may have already been invested in anticipation of these flows or may have been invested elsewhere.
Over the next few weeks at least four corporates are expected to issue in the domestic market, with most of the issuance concentrated around the five year area.
Traders anticipate that the corporate issues will not affect the bond market excessively, as the coupon flows from government paper should take up the slack in terms of cash available.
South African CPI and PPI reports are due out next week Tuesday and Wednesday, with the local markets expecting these to reflect the continued downward trend in inflation. CPIX, used by the government as its inflation targeting measure, is expected at 6.2% y/y from last month's 6.4% y/y. This is still outside the government's targeted 3%-6% range. PPI is expected at 1.5% from June's 2.3%.
Second quarter GDP figures will be announced on August 26. July money supply, private sector credit and trade balance figures will be released on August 29.