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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: Global markets mixed as hopes of stimulus fade
SA: SA economy probably contracted by 30%-40% q/q SAAR
Rand: Pares losses, but on the back foot again
Local rates: R2037 tail auction
Source: WHO, NICD
Global markets closed Tuesday’s trading session mixed. Asian and European equity stocks closed in the green, while US equity stocks closed in the red as hopes of an imminent stimulus package faded following reports that officials have not returned to the negotiating table since talks collapsed last Friday. The S&P snapped its seven-day winning streak, ending the day 0.8% lower. The German DAX was up 2.0% on hopes of a speedy recovery after the ZEW survey showed that economic expectations increased to 71.5 points in August from 59.3 in July – rising above the Bloomberg estimate of 54.5.
US Treasury yields ticked higher, with the 10-yr and 2-yr up 6.6bp and 1.8bp, respectively. The rise in yields saw the price of gold retreat for the third consecutive day, declining by 5.7% on Tuesday to close below US$2,000/try oz. The precious metal is again under pressure this morning, piercing below US$1,900/try oz. The US dollar index moved sideways and closed Tuesday’s trading session unchanged, failing to gain from rising yields.
EM currencies were on a better footing on Tuesday. The rand recouped Monday’s losses, strengthening by 1.2% against the US dollar. This was better than the average of EM currencies, with the MSCI for EM currencies up 0.4% on the day. However, EM currencies seem to be struggling to make further gains this morning and have instead pared back some of yesterday’s gains as risk sentiment fades.
The Reserve Bank of New Zealand (RBZN) seems to have set the stage in terms how central banks in advanced economies will probably respond to the second wave of covid-19 infections. The RBZN left its key policy rate unchanged at 0.25% but surprised the market by expanding its bond-buying programme to NZ$100bn from NZ$60bn. The bank also indicated that it stands ready to step up its efforts, including negative real rates. The move comes as New Zealand reintroduced lockdown measures following reports of four new locally transmitted covid-19 cases.
Locally, focus remains on high-frequency data for an assessment of 2Q20 GDP. The manufacturing data out yesterday continued to trend in line with our expectations as output continued to recover on a monthly basis, albeit at a lesser pace. On an annual basis, the contraction in manufacturing production slowed to 16.3% compared to May’s 32.4% decline. Today, Stats SA will publish retail sales data for June at 13:00, which we expect will show similar trends to those we observed in manufacturing output. Quarter-to-date data indicates that GDP probably contracted by 30%-40% q/q SAAR in 2Q20. However, it’s important to note that the high-frequency data captures about 40%-50% of GDP, reflecting uncertainty about how the other sectors that we have no sight of performed.
A slow start to a short week can best describe yesterday’s activity on the bond market. The nominal bond curve was a tad steeper heading into the weekly auction. The National Treasury came to market to issue R2032, R2037 and R2044, and while R2037s is not as popular among local and offshore account, the 10bp tail relative to mark-to-market surprised the market. The R2032s cleared auction at 10.19 (market 10.17) with a bid-to-cover ratio of 1.81, the R2037s cleared auction at 11.28 (market 11.18) with a bid-to-cover ratio of 1.56, while more preferred R2044s cleared auction at 11.52 (market 11.55) with a bid-to-cover ratio of 3.18. With packs trading marginally wider from last week, it was the 20-yr/R2040 that widened the most, with the 20-yr IRS closing at 7.93 on the day.
We saw some fast money accounts in the FRA market yesterday expressing interest in 1x4, 12x15, while there were some payers in the 15x18. On the vol front, we made market on R2030 and R2048 call spread for local real money accounts. The rand has returned to the 17.50 handle this morning, down from a 17.79 high printed on Monday.
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