Johannesburg - The rand gained against the dollar on Monday, starting a risk-heavy week in firm territory after heavy losses last week, with investors waiting for the finance ministry's update on the budget and economic outlook to provide direction.
The rand gained its way close to the psychologically key 11 area on Monday, but worries about South Africa's budget deficit capped rand bulls at 11.0180 per dollar.
Finance Minister Nhlanhla Nene is due to deliver his medium term budget statement on Wednesday and economists expect a wider budget deficit target for this year.
Concerns about a widening shortfall on the budget add to worries about a yawning gap on the current account.
Investors are also keenly awaiting an announcement about how the government plans to plug a funding gap in state-owned power utility Eskom.
The anticipated larger funding requirement is keeping bonds trading within recent ranges.
“We do not expect to see any change to the sizes of government auctions, but believe that the amount to be borrowed will be increased,” Standard Bank's fixed income strategists said in a market note.
South Africa's gross loan debt target increased by 0.9 percentage points in the last budget in February.
The Treasury is likely to borrow abroad to help fund part of any gap.
“We believe that the hints of possible intent to delay some expenditure items would be bond-market-positive.”
The yield on the 2026 benchmark bond nudged up half a basis point to 8.08 percent, trading within last week's levels.
This week investors will also be looking out for the central bank's business cycle indicator on Tuesday, a key gauge of the economic outlook, and will position for inflation data on Wednesday. - Reuters