Capital Markets Coronavirus Economy Finance Government Securities

South African central bank reduces bond purchases to ZAR 5B in June

The South African central bank reduced its government bond purchases to ZAR 5B (US$292.64M) in June, half the monthly average, bringing its bond holdings to ZAR 35.9B, data showed on Tuesday.

The Reserve Bank began a series of emergency liquidity measures in late March to ease the stress on banks and capital markets caused by the coronavirus pandemic. Among them were extra repo auctions and 275 basis points worth of lending rate cuts.

The bank has since slowed those support measures as local financial markets recovered, resisting calls from labour and some economists to resort to full-blown quantitative-easing-style funding of government’s gaping budget deficit.

The bank’s June statement of assets and liabilities showed its accommodation to commercial banks via repurchase, or repo agreements, had fallen to ZAR 60B in June from ZAR 73.5B in the previous month.

Also read: South Africa’s “junk” bonds back in demand as high-yield lures local, foreign investors

In May, the central bank reduced overnight repo auctions to one per day from the two it implemented to pump liquidity to commercial banks.

Bond yields have returned to near pre-COVID-19 levels and the rand has recovered from record lows, although that recovery remains fragile with the economy contracting for the consecutive time in the first quarter.

Source: Reuters

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: