S.Africa's rand, bonds range-bound

JOHANNESBURG (Reuters) - South Africa's rand and government bonds firmed slightly but made no moves to push out of recent ranges on Friday with light volumes expected from offshore investors.

After the temporary euphoria of President Barack Obama's re-election, focus is now squarely on how he will handle the U.S. "fiscal cliff" - expiring laws that are set to cut government spending and raise taxes, possibly dragging the world's biggest economy into recession.

Prospects for the euro zone economies look bleak, after the European Central Bank said on Thursday the region showed little sign of managing a recovery before year-end, plunging the euro to a two-month low.

The rand was up at 8.6960/dollar at 0644 GMT, off a 8.7299 close in New York on Thursday but still within yesterday's range.

Government bonds were also slightly firmer, supported by foreign money flowing into emerging markets in search of higher yields.

Dealers expected thin volumes and sideways trading as local dealers adopt a wait-and-see approach.

"We are still getting some inflows from offshore. After the U.S. elections are finished everyone is waiting for the response to the looming fiscal cliff issue," said Mark Southworth, a bond trader for Citi.

The yield on the 2015 note was steady at 5.47 percent while that on the longer-dated 2026 issue dropped 1.5 basis points to 7.625 percent.

"We're going to have very quiet trade but with yields grinding lower until we get some kind of idea on the strategy around the fiscal cliff," Southworth said.

A Treasury sale of inflation-linked paper will be keenly watched at 0900 GMT, where expectations are for a strong auction as investors feel the need to hedge for higher-than-previously-thought inflation.

The South African statistics agency this week announced an updated consumer price index basket with new weightings, which is expected to push the inflation trajectory higher.

Source: http://news.yahoo.com/africas-rand-bonds-range-bound-070053699--finance.html

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