South Africa Sells Seven-Year Bonds at Lowest Yield Since Sale in January
South Africa sold seven-year bonds at the lowest yield since January amid signs a weak economic recovery may allow the central bank to hold borrowing costs at a 30-year low this year.
The Reserve Bank sold 1.3 billion rand of the 8 percent securities maturing in 2018 at an average yield of 8.38 percent at its weekly auction, the lowest yield since the auction on Jan. 14. Investors bid for 1.91 times the amount on offer, the Pretoria-based central bank said on its Bloomberg page. The bank also auctioned 800 million rand of 10.5 percent notes due 2026 at an average yield of 8.67 percent, the lowest since the auction on Feb. 18, with investors bidding for 4.09 times the amount on offer.
Money supply and credit growth in Africa’s biggest economy unexpectedly slowed in March, the Reserve Bank said on April 29. The purchasing managers’ index fell in April, Kagiso Securities Ltd. said today, indicating a weak recovery in manufacturing, while the jobless rate increased to 25 percent in the first quarter, according to the Pretoria-based government statistics agency.
The data indicates that “domestic demand is still weak and rate hikes are not an option at this juncture,” BNP Paribas analysts led by London-based Paul Mortimer-Lee said in an e- mailed research note before the bond auction. Lower interest rates boost the returns of fixed-interest bonds relative to cash.
To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
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