Johannesburg - There's a funny thing about this bond market. When it was volatile and crazy, and virtually impossible to call, dealers regularly said yields would come down strongly once calm returned.
Now that calm has come back, however, dealers are much more ready to emphasis the negatives, while saying the market is cheap and there is a possibility of a big move down later.
Last week was unusual for the market. Sure, the yield on the R150 bond, which rises when the price falls, had a 50-point trading range, not exactly a stationary market. But that was less movement than the market has had for some time and, for a change, the movement was all in one direction: down.
Every day last week the yield fell, finishing the week at 15,73 percent, almost at pre-crisis level. So why are people so worriede Well, a few extraneous elements could cause damage. Some dealers were worried about the Richmond funerals this weekend. Fortunately, these were trouble-free.
Next is Thursday's options close-out. The market looks fairly square, but there could be a shakeout. In April, Tito Mboweni takes over operations at the Reserve Bank, in August he becomes governor. Sometime in that period we also have elections.
Add in the registration saga, the constant possibility of massacres in KwaZulu Natal and bombs in the Cape, and it's obvious why few people are singing the "low inflation" song loudly.
But there may be another reason for the caution. For years, our bond market was the most liquid in the world. It isn't at the moment. Foreign jobbers who returned to it at the beginning of the year after being forced out in last year's turmoil got burned again. They may not return.
With less volatility, less buying and less volume, we may in time have fewer jobs - which may be why caution remains uppermost in the market.
