Rand Set for Weekly Advance as Yields Fall on Stimulus
The rand rose for a fifth day in its longest winning streak in more than three months and bonds rose as gains by pro-bailout parties in Greek elections boosted demand for riskier assets.
South Africa’s currency appreciated as much as 1.5 percent before paring its gain, trading 0.2 percent stronger at 8.3387 per dollar as of 4:47 p.m. in Johannesburg. The rand’s five-day rally is its widest patch of advances since Feb. 28. Yields on the country’s 6.75 percent bonds due in 2021 fell one basis point, or 0.01 percentage point, to 7.53 percent, the lowest since May 3.
Emerging-market stocks rallied after Greece’s New Democracy and Pasok parties won enough seats to form a majority in the 300-member parliament, according to the parliament’s speaker, easing concern that Greece would reject austerity measures needed to qualify for international aid. Stocks and the rand pared gains after Spanish bond yields climbed to a euro-era record, spurring concern Europe’s debt crisis is deepening.
“It all implies that a near-term exit from the euro zone is unlikely to happen and that the euro zone will probably stand firm in its support of the Greek economy,” Quinten Bertenshaw, a Johannesburg-based analyst at Tradition Analytics, wrote in e- mailed comments. “This pricing out of risk will be positive for risk assets in general.”
Spanish borrowing costs climbed after the Bank of Spain said bad loans as a proportion of total Spanish lending jumped to the highest level since 1994.
The premium investors demand to hold South Africa’s dollar- denominated bonds rather than U.S. treasuries widened four basis points to 228 basis points, according to JPMorgan Chase EMBI indexes.
“The focus will now shift to Spain,” John Cairns and Josina Solomons, currency strategists at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “With the country’s yields hitting 7 percent, it appears they will need a full bailout.”
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