SA bonds gain on inflation outlook

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Independent Newspapers

South African Reserve Bank governor Gill Marcus. Photo: Leon Nicholas.

Johannesburg - South African bonds rallied, heading for the highest in more than a month as investors’ inflation expectations waned. The rand swung between gains and losses against the dollar.

Inflation slowed for a third month in November, staying within the Reserve Bank’s 3 percent to 6 percent target range and relieving pressure on Governor Gill Marcus to start raising interest rates early next year. Foreign buyers have sold a net 1.19 billion rand ($114 million) of South African bonds this month, extending the selloff to a second month, according to data from stock market operator JSE Ltd.

“We are experiencing some year-end demand for government bonds as investors probably start to see value in them following a terrible year for bonds,” Ion de Vleeschauwer, chief currency dealer at Bidvest Bank Ltd., said by phone from Johannesburg today. “The outlook for inflation is also better.”

The yield on rand-denominated bonds due December 2026 fell five basis points, or 0.05 percentage point, to 8.15 percent by 10:39 a.m. in Johannesburg, the lowest since Nov. 20 on a closing basis. The rand gained 0.2 percent to 10.3375 per dollar after earlier retreating the same amount. The currency has lost 18 percent against the dollar this year, the worst performer among 16 major currencies tracked by Bloomberg.

South African local-currency debt returned 1.1 percent this month and 0.6 percent in 2013, compared with a 16 percent gain in 2012, according to Bank of America Merrill Lynch indexes. The country relies on inflows to its capital markets to fund its current-account deficit. - Bloomberg

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