Bloomberg News

South Africa Bond May Gain, Stochastics Show: Technical Analysis

January 09, 2012

Jan. 9 (Bloomberg) -- South African three-year bonds are set to rally as a decline that pushed the yield to a three-week high today is overdone, ETM Analytics said, citing trading patterns.

The stochastic oscillator for the 13.5 percent securities was 27.5 today, below the 30 threshold that signals the bonds may have declined too fast and are poised the strengthen.

Stochastics “suggest the bond is oversold, and that the yield may begin to moderate in the week ahead,” George Glynos, an economist at Johannesburg-based ETM Analytics, wrote in e- mailed comments. “We continue to maintain our bullish view of South African benchmark bonds relative to U.S. Treasuries.”

The yield on the 2015 bonds rose 12 basis points since Jan. 3 to 6.87 percent, the highest since Dec. 20, as concern that Europe’s debt crisis may spread to Hungary damped investor appetite for riskier, emerging-market assets. Foreign investors were net sellers of 607 million rand ($74 million) of South African bonds last week, according to JSE Ltd. data.

Stochastics measure the price of a security relative to its highs and lows during a particular period. A reading above 70 indicates a security may have weakened too much and could appreciate.

--Editors: Peter Branton, Alan Purkiss

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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