Johannesburg - South African bonds declined, pushing yields higher for a third day before the release of data that may show producer inflation in Africa’s biggest economy is accelerating. The rand depreciated against the dollar.
The producer-price inflation accelerated to an annual 6.3 percent in July from 5.9 percent the previous month, according to the median estimate of nine economists in a Bloomberg survey. Rising manufacturing costs and a weakening rand may risk driving consumer inflation further above the central bank’s 3 percent to 6 percent target range at a time when tensions in Syria are pushing up crude prices. The rate was 6.3 percent last month.
“The weaker rand and higher oil price have dire ramifications for local fuel prices,” Mohammed Nalla, head of strategic research at Nedbank Group in Johannesburg, said in an emailed note. “This represents an upside risk to inflation as well as a negative for South Africa’s extended trade deficit and a potential hurdle to growth,” he said. That’s keeping the rand “on the back foot”, Nalla said.
South Africa’s currency weakened 0.2 percent to 10.3349 per dollar as of 10.46am in Johannesburg, rebounding from an earlier decline of 0.2 percent. Yields on benchmark 10.5 percent bonds due December 2026 climbed one basis point, or 0.01 percentage point, to 8.54 percent.
Foreign investors sold a net R2.16-billion of South African stocks and bonds on Wednesday, according to the JSE, which runs the nation’s stock and bond exchanges. - Bloomberg