Date: 15th January 2010
Date: 17 September 2010 USD-ZAR 7.0581/1667 GBP-USD 1.5642/746 GOLD $1278.80
Time (GMT) 09:00
EUR-ZAR 9.2849/3944 USD-JPY 85.499/929 ALLSHARE 28 464.93
Country
Event
SA
ILB Auction (R600mn)
GBP-ZAR 11.1067/2243 AUD-USD 0.9397/478 DJI 10 594.83
EUR-USD 1.3085/167 R157 7.36% 3M JIBAR 6.035%
Month
Exp
Prior
0.30%
0.50%
06:00
DE
PPI m/m
Aug
08:00
EZ
Current account balance sa
Jul
12:30
US
CPI m/m
Aug
0.20%
0.30%
12:30
US
CPI X y/y
Aug
1.00%
0.90%
13:55
US
Michigan preliminary
Sep
70.0
68.9
-4.6bn
Today’s Talking Point Treasury confident SA can meet higher wage demands: A Treasury official stated yesterday that issuance in the domestic market would not exceed the projected R150bn in light of concerns that this would be the case with higher wage negotiations in the public sector. Fin Min Gordhan recently stated that these wage hikes could cost SA some R6bn, but yesterday’s Treasury comments highlight that domestic GDP growth is likely to come in above Treasury's expectations of 2.4% in 2010 and that SA's March Eurobond of R2bn would help in terms of funding needs. Any new issuance would likely be to secure prefunding for the next fiscal year. According to the Treasury, a "contingency reserve" is in place to meet higher wage demands.
Rand Update It has been a reasonably strong performance by global equity markets yet again and with investors feeling a little more upbeat on the prospects of the US and European economies, the JPY is now on the defensive once more. The effects of the intervention have lingered for a little longer and will have offered further support to the risk trade. That being said, the JPY intervention has not been particularly well received by other major economies that are also battling with weak domestic exports. Equity market gains have also translated into a modest reduction in risk aversion as reflected by the slight retreat in the VIX. The levels on the VIX are generally consistent with periods when emerging market currencies enjoy support. The combination of firmer Wall St futures, and stronger equity markets in Asia will go a long way to offering some support to the ZAR this morning. Again it is true that the bulk of the trend movements are established by developments abroad, with the debate on the implementation of a portfolio tax not having had a massive impact on sentiment. According to Reuters data (bid chart), the ZAR weakened against the USD on Thursday, closing at R7.136 from R7.0498 on Wednesday. The ZAR also lost ground vs. the EUR and GBP, ending at R9.3317 vs. the EUR from R9.1676 on Wednesday, while finishing at R11.1464 vs. the GBP from R11.0111 the previous day.
Bond Update Bonds will continue to track the performance in the rand in terms of the short term movements but over the longer term the following points should be considered. It may also be worth noting some of the comments from the government officials yesterday: Lungisa Fuzile head of asset and liability management at National Treasury indicated that issuance in the domestic bond market would not exceed the projected R150bn despite the above budget wage increases to public sector workers. There had been some suggestions that borrowing may have to increase to meet the wage bill and pay rises of over 7.5% given that salaries and wages account for one third of all spending. Finance Minister Gordhan indicated that the pay rises above the budgeted 5.2% would cost an extra R6bn and some programmes would have to be cut to compensate for the extra expenditure. However, one gets the sense government will utilise the revenue over-runs (forecast by many private sector economists) to meet the extra wage bill. Moreover, Fuzile indicated that Treasury has a contingency reserve, a cushion that is already built in and that NT has scope to meet the higher than budgeted pay increases. An increase in domestic borrowing requirements was described as “highly improbable”. As such the supply side of bonds remains on track and this will not have a major impact on the bond prices leaving them to respond to other factors.
JSE Update Local stocks ended marginally lower yesterday, tracking the weaker session in Europe as sentiment remained subdued amid focus on US inflation data. Market reports suggest volumes were thin despite a futures close-out, with the lack of activity in the market suggesting that investors were not too concerned of significant downside risks. At the close of trade the JSE ALSI had lost 0.1%, with resources fairly flat and financials down 0.7%. US stocks had a mixed result on the day, with the Dow Jones finishing 0.2% higher, the S&P500 ending just marginally in the red and the Nasdaq gaining 0.1%. Stocks remained fairly range bound, with the VIX volatility index rising above 22.0 and Aug PPI data showing a slightly higher m/m gain than what the market had expected. This saw investors remain somewhat cautious. Meanwhile the Asian markets are mostly in the green overnight. The Nikkei has closed 1.2% stronger on the back of further JPY weakness and speculation of more intervention to come by Japan, and Aussie stocks have added 0.7%. At the time of writing the Hang Seng was up 1.1%, while the Shanghai composite had fallen 0.1%.
This report is provided on a complimentary basis by IQuad Group Limited and is prepared by Econometrix Treasury Management (Pty) Ltd. www.e-treasury.co.za DISCLAIMER: IQuad Limited (IQuad) obtains information for its analyses from sources, which it considers to be reliable, but IQuad does not guarantee the accuracy or completeness of its analyses or any information contained therein. IQuad makes no warranties, expressed or implied as to the results obtained by any person or entity from use of its information and analyses, and makes no warranties or merchantability or fitness for a particular purpose. In no event shall IQuad be liable for indirect or incidental, special or consequential damages, regardless or whether such damages were forseen or unforeseen. IQuad shall be indemnified and held harmless from any actions, claims, proceedings, or liabilities with respect to its information and analyses. Clients should be fully aware of the risks involved in trading stock market related products. All illustrations, forecasts or hypothetical data is for illustrative purposes only and is not guaranteed. The information contained in this communication does not constitute an offer, advertisement or solicitation for investment, financial or banking services. It is for informative purposes and not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. The information therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient.
Time (GMT) 09:00
EUR-ZAR 9.2849/3944 USD-JPY 85.499/929 ALLSHARE 28 464.93
Country
Event
SA
ILB Auction (R600mn)
GBP-ZAR 11.1067/2243 AUD-USD 0.9397/478 DJI 10 594.83
EUR-USD 1.3085/167 R157 7.36% 3M JIBAR 6.035%
Month
Exp
Prior
0.30%
0.50%
06:00
DE
PPI m/m
Aug
08:00
EZ
Current account balance sa
Jul
12:30
US
CPI m/m
Aug
0.20%
0.30%
12:30
US
CPI X y/y
Aug
1.00%
0.90%
13:55
US
Michigan preliminary
Sep
70.0
68.9
-4.6bn
Today’s Talking Point Treasury confident SA can meet higher wage demands: A Treasury official stated yesterday that issuance in the domestic market would not exceed the projected R150bn in light of concerns that this would be the case with higher wage negotiations in the public sector. Fin Min Gordhan recently stated that these wage hikes could cost SA some R6bn, but yesterday’s Treasury comments highlight that domestic GDP growth is likely to come in above Treasury's expectations of 2.4% in 2010 and that SA's March Eurobond of R2bn would help in terms of funding needs. Any new issuance would likely be to secure prefunding for the next fiscal year. According to the Treasury, a "contingency reserve" is in place to meet higher wage demands.
Rand Update It has been a reasonably strong performance by global equity markets yet again and with investors feeling a little more upbeat on the prospects of the US and European economies, the JPY is now on the defensive once more. The effects of the intervention have lingered for a little longer and will have offered further support to the risk trade. That being said, the JPY intervention has not been particularly well received by other major economies that are also battling with weak domestic exports. Equity market gains have also translated into a modest reduction in risk aversion as reflected by the slight retreat in the VIX. The levels on the VIX are generally consistent with periods when emerging market currencies enjoy support. The combination of firmer Wall St futures, and stronger equity markets in Asia will go a long way to offering some support to the ZAR this morning. Again it is true that the bulk of the trend movements are established by developments abroad, with the debate on the implementation of a portfolio tax not having had a massive impact on sentiment. According to Reuters data (bid chart), the ZAR weakened against the USD on Thursday, closing at R7.136 from R7.0498 on Wednesday. The ZAR also lost ground vs. the EUR and GBP, ending at R9.3317 vs. the EUR from R9.1676 on Wednesday, while finishing at R11.1464 vs. the GBP from R11.0111 the previous day.
Bond Update Bonds will continue to track the performance in the rand in terms of the short term movements but over the longer term the following points should be considered. It may also be worth noting some of the comments from the government officials yesterday: Lungisa Fuzile head of asset and liability management at National Treasury indicated that issuance in the domestic bond market would not exceed the projected R150bn despite the above budget wage increases to public sector workers. There had been some suggestions that borrowing may have to increase to meet the wage bill and pay rises of over 7.5% given that salaries and wages account for one third of all spending. Finance Minister Gordhan indicated that the pay rises above the budgeted 5.2% would cost an extra R6bn and some programmes would have to be cut to compensate for the extra expenditure. However, one gets the sense government will utilise the revenue over-runs (forecast by many private sector economists) to meet the extra wage bill. Moreover, Fuzile indicated that Treasury has a contingency reserve, a cushion that is already built in and that NT has scope to meet the higher than budgeted pay increases. An increase in domestic borrowing requirements was described as “highly improbable”. As such the supply side of bonds remains on track and this will not have a major impact on the bond prices leaving them to respond to other factors.
JSE Update Local stocks ended marginally lower yesterday, tracking the weaker session in Europe as sentiment remained subdued amid focus on US inflation data. Market reports suggest volumes were thin despite a futures close-out, with the lack of activity in the market suggesting that investors were not too concerned of significant downside risks. At the close of trade the JSE ALSI had lost 0.1%, with resources fairly flat and financials down 0.7%. US stocks had a mixed result on the day, with the Dow Jones finishing 0.2% higher, the S&P500 ending just marginally in the red and the Nasdaq gaining 0.1%. Stocks remained fairly range bound, with the VIX volatility index rising above 22.0 and Aug PPI data showing a slightly higher m/m gain than what the market had expected. This saw investors remain somewhat cautious. Meanwhile the Asian markets are mostly in the green overnight. The Nikkei has closed 1.2% stronger on the back of further JPY weakness and speculation of more intervention to come by Japan, and Aussie stocks have added 0.7%. At the time of writing the Hang Seng was up 1.1%, while the Shanghai composite had fallen 0.1%.
This report is provided on a complimentary basis by IQuad Group Limited and is prepared by Econometrix Treasury Management (Pty) Ltd. www.e-treasury.co.za DISCLAIMER: IQuad Limited (IQuad) obtains information for its analyses from sources, which it considers to be reliable, but IQuad does not guarantee the accuracy or completeness of its analyses or any information contained therein. IQuad makes no warranties, expressed or implied as to the results obtained by any person or entity from use of its information and analyses, and makes no warranties or merchantability or fitness for a particular purpose. In no event shall IQuad be liable for indirect or incidental, special or consequential damages, regardless or whether such damages were forseen or unforeseen. IQuad shall be indemnified and held harmless from any actions, claims, proceedings, or liabilities with respect to its information and analyses. Clients should be fully aware of the risks involved in trading stock market related products. All illustrations, forecasts or hypothetical data is for illustrative purposes only and is not guaranteed. The information contained in this communication does not constitute an offer, advertisement or solicitation for investment, financial or banking services. It is for informative purposes and not intended to constitute advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice. The information therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient.
