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Copy and paste

GM Daily: Copy and paste

Global: Trump’s executive order spree

SA: A new graft committee

Rand: August weakness returns, rand to trade around 17.50 to the US dollar

Local rates: Bonds hold their ground

What to watch today

GE Trade Balance
GE Industrial Production WDA (y/y)
SA Gross Reserves
SA Net Reserves
US Change in Nonfarm Payrolls
US Unemployment Rate
US Consumer Credit
CH Trade Balance

Covid-19 update

Source: WHO, NICD

Economics and markets

The negotiations between the White House and Democratic Party continue to show little progress in coming to an agreement on a new fiscal stimulus package for the US.
President Trump signs executive orders which bar US residents from conducting business with ByteDance and WeChat.
US markets closed in the green, possibly buoyed by better-than-expected initial jobless claims.
Asian markets are trading weaker at the end of the week as US-Sino tensions impact market sentiment.
The Turkish lira is down 4.5% for the month against the US dollar, with the rand not too far behind, weaker by 2.8%.
President Ramaphosa announces a new ministerial committee tasked with investigating covid-related corruption.
USD/ZAR opens at 17.42; EUR/ZAR at 20.70; GBP/ZAR at 22.90 and CNY/ZAR at 2.51.

This morning, I was tempted to “copy and paste” yesterday’s global commentary, particularly on the US. Not much has changed – the negotiations between the White House and Democratic Party continue to show little progress in coming to an agreement on a new fiscal stimulus package for the US. And further, US-Sino tensions continue, with President Trump signing executive orders banning US residents from conducting business with ByteDance, the owner of TikTok, as well as signing a similar executive order for WeChat. A 45-day grace period has been given, but by mid-September the orders will be in full force. Trump’s executive order spree is probably not over yet given the stalled stimulus talks, with the president suggesting that he will sign executive orders extending unemployment benefits.

Despite the stalled stimulus talks, US markets closed higher in yesterday’s trading session, possibly buoyed by better-than-expected initial jobless claims, which fell to 1.2 million people, down from 1.4 million last week. Asian markets, though, will probably close this week in the red, pushed down by the increased US-Sino tensions in particular – with the Shanghai index and the Hang Seng index hit hardest, down 1.23% and 1.65%, respectively (at the time of writing). The JSE should follow the negative trend today as there is significant uncertainty in the global market, but could see some downside limitations as the gold price remains above the US$2,000 level. This uncertain environment has also impacted EM currencies, with the Turkish lira showing the biggest slide against the US dollar, weaker by 4.5% for the month, and the rand 2.8%. This weakness could continue, with August a historically difficult month for the rand.

On the local front, covid-related corruption remains a focal point in the news flow. With President Ramaphosa appointing a ministerial committee tasked with considering all procurement undertaken since the announcement of the state of disaster. All ministers and provinces have been asked to make this information available to the committee as soon as possible. The President will then make the committee’s report available publicly, once finalised. Let us hope that this group can make speedy progress and more importantly that any findings of graft result in consequences, otherwise it will be just another ministerial committee and just another report.

I’m sure many of us are counting down the hours to the end of the day, as it will then mark the beginning of a long weekend, with Sunday’s public holiday, Women’s Day, being observed on Monday. However, after a week of greater than normal devastation (for 2020), do take the time to appreciate your friends, family and, in particular, the women in your life.

Siobhan Redford

Local rates

With the rand under pressure on Thursday after the Turkish lira dragged EM currencies down along with it, bonds managed to maintain their ground while price action remained uneventful. Local clients were reported as net buyers on the day, while foreigners took a step back and focused on the currency. The main event was futures close out, which should inflate the overall turnover numbers, but outright flow remained muted.

Overnight, we've seen a slight risk-off tone, with Asian tech companies leading the way. The rand opens up slightly weaker, but bonds should continue tracking their own course. The SARB releases data on its FX and gold reserves today as well as the increase in its bond holdings for the month of July, which will be closely watched. Non-farm payrolls will also be released today.

The National Treasury will issue I2029s, I2046s and I2050s today. Last week’s auction gave quite a strong buy signal, especially in the shorter-dated I2025s. This week’s auction offers longer duration and is expected to receive reasonable interest. The I2029 should see less interest, as it is the smallest issue in the IGOV basket (less than 4%), and it is also the most recent, which leads to less interest generally. The I2046s and I2050s are expected to be well bid, despite both ultra-long dated stocks being on auction. Taking the lead from last week’s auction, we expect all three bonds to clear at, or slightly stronger than, current mark-to-market levels.