Johannesburg - Yields on South African debt hit their highest in 19 months on Tuesday and the rand dropped to its lowest in six weeks as investors continued to dump local assets in a global sell-off of emerging markets.
The yield on the 2026 benchmark bond rose 7 basis points to 8.665 percent, its highest since January last year.
The rand currency slid to 10.2270 to the dollar early in the session, from a 10.2050 close in New York on Monday.
“(Emerging market) currencies are starting to be punished more heavily for running interest rates that are too low and current account deficits that remain too wide,” Tradition Analytics said in a note.
“South Africa shares this status and there is reason for continued underperformance of the rand as strike action intensifies.”
Investors have been exiting riskier emerging markets on the assumption the US Federal Reserve will start to scale back its bond-buying programme next month.
South Africa is also under pressured from wage strikes - with workers in the auto industry downing tools on Monday - while tough wage negotiations continue in the mining sector.
If the rand continues its slide against the dollar, it should find support at 10.2990, which it hit on July 8.
“While the upside move on dollar/rand has run quite far in a short space of time, any technical pull backs are likely to be short-lived with few factors in favour of a meaningful rand recovery at this stage,” Tradition Analytics added, saying they expected to see a higher range.
The South African Reserve Bank will release its leading economic indicator for June at 07h00 GMT. The sentiment indicator, which collates data such as vehicle sales and job advertisements, decreased by 0.5 percent in May.
National Treasury is looking to place R2.35-billion in 2023, 2031 and 2037 bonds, where yields are expected to reflect the sell-off in the secondary market. - Reuters