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RMB – a division of FirstRand Bank Limited, is an Authorised Financial Services and Credit Provider NCRCP20.
Copyright © RMB 2026. All rights reserved.
Global: Positive US payrolls buoys sentiment
SA: A rare positive – SA records a positive current account surplus
Rand: Consolidating below 17.00
Local rates: Quiet day as we head into the weekend
Source: WHO, NICD
US Independence Day is synonymous with elaborate firework displays, confectionary decorated in stars and stripes, festive parades and the classic contemporary film in which an alien race destroys major cities of the world with its advanced weaponry. This year might be less exciting as states apply varying levels of caution at public gatherings, fearful of the risk of greater covid-19 transmissions. As case numbers soar, governors are leaning more towards medical advice by encouraging residents to wear masks. A polarising issue among the GOP.
With US bond and equity markets closed, global markets are trading off the momentum built earlier in the week. No fireworks here. Prosperous PMI data and an exceptional US non-farm payrolls print provided a tailwind to stock futures, despite global case numbers still increasing at pace. Economic data has had a disproportionate influence on market sentiment over the last week, despite evidence of rising case numbers across the US and Latin America.
Although the US dollar market remains open for settlement, thinner trading volumes should immobilise meaningful EM currency gains. In the absence of meaningful data, the rand is left to its own devices. Inspired by the better-than-anticipated US labour report and SA’s startling current account surplus of 1.3% of GDP in 1Q20, the first in 17 years, USD/ZAR pushed past 17.00.
Having traded down to the 16.87/90 support levels (USD/ZAR’s best showing in four weeks), the currency pair cantered back towards 17.00 at the close of play. Consolidation is the order of the day across the EM spectrum. Further strength is conditional on whether incoming economic data continues to support a V-shaped recovery and geopolitical tensions between the US and China subside
Taken aback by the 1Q20 current account surplus, South Africans might look towards brighter days. Alas, the record of SA’s transactions with the rest of the world does not reflect the country’s broader economic realities, which continue to dampen confidence. As we contemplate the peak in local infection levels, businesses that are permitted to trade are treading cautiously. Speculation of lockdown 2.0 being adopted in Gauteng, South Africa’s most populous province, is unsettling, as medical facilities struggle to contend with the influx of covid-19 cases. It remains to be seen whether the NT’s additional allocations toward healthcare interventions will prove adequate.
Remain watchful, safe and vigilant.
Over the last week or so, we have noticed a definite drop in overall bond market activity as some stability has returned and event risks like the budget have passed. Yesterday was no exception as bonds initially tried to rally on the stronger rand/weaker US dollar, but then ran into the greenshoe levels on the R2030 and R2035 which, given the large size these days, effectively stopped the market in its tracks, after which it basically stopped trading and drifted weaker into the close. This lack of activity should continue as we head into the weekend with the US holiday today.
The rand, however, has seen further gains overnight, sneaking through the R17/US$ level, and we find ourselves at R16.985/US$ this morning, which in theory should help the R186 break through the 7.60% level again, but given the good take-up of greenshoe options yesterday, especially by offshore investors, the bond bulls may be disappointed this morning.
On the issuance front, we have the first of the National Treasury’s new bumper-size ILB auctions this morning, with R2bn available across the I2029/2038/2046 strip of bonds. With the increased size, our feeling is that the auction should clear at or slightly above the relative MTM levels, with most of the interest in the longer end of the curve.
Happy Independence Day to our American friends for tomorrow!!
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