#MTBPS: Budget deficit sends rand, bonds into tailspin

Published Oct 24, 2018

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JOHANNESBURG – The rand fell more than 1 percent and bonds slid on Wednesday after Finance Minister Tito Mboweni delivered a medium term budget with wider deficit estimates and lower growth forecasts.

At 5pm, the rand was bid at 14.51 to the greenback, 7c weaker on the day.

Government bonds were also weaker, with the yield on the benchmark instrument due in 2026 up 6.5 basis points at 9.23 percent.

Mboweni earlier delivered a bleak maiden budget, raising the deficit estimate for the 2018/19 fiscal year to 4 percent of gross domestic product (GDP), while halving the growth forecast for this year to 0.7 percent.

“The budget deficit erased the confidence of the market and the rand sold off quite sharply. The rand remains on the defensive,” said ETM economist Halen Bothma.

Investors remained skittish as Africa’s most industrialised economy struggles with ballooning debt that risks pushing its sovereign credit ratings deeper into “junk” territory.

Rating’s agency Moody’s is expected to update its assessment this week. Moody’s is the last of the top three rating agencies to have Pretoria’s debt at investment grade.

In equities, the all share index fell 0.57 percent to 50 877 points while the blue chip Top40 index was 0.75 percent lower at 44 669 points.

Naspers fell 3.96 percent to R2 575 rand after Tencent Holdings, in which it has a 31 percent shareholding, closed 0.75 percent lower on reports that Chinese authorities has halted issuing gaming licences.

The gold index fell 1.45 percent as prices slipped on a firmer dollar. 

REUTERS

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