South African Bond Yields Drop, Rand Retreats After Rally

South Africa’s bonds gained for a third day as better-than-expected U.S. economic data spurred investors to buy riskier assets. The rand declined from the highest level in almost a week.

Yields on benchmark 10.5 percent bonds due December 2026 dropped 3 basis points, or 0.3 percentage point, to 7.29 percent as of 11:45 a.m. in Johannesburg. The rand retreated 0.1 percent to 9.0456 per dollar after reaching as high as 9.0210 yesterday.

The MSCI Emerging Markets Index (MXEF) headed for a two-week high after the Institute for Supply Management in the U.S. said yesterday its index of non-manufacturing businesses increased to 56 last month from 55.2 in January. South African producer prices rose 5.8 percent in January from a year ago, compared with 6.3 percent in December, a government report yesterday showed.

“Global markets are clearly in a ‘risk-on’ mood,” Theuns de Wet, the head of global markets research at Johannesburg- based Rand Merchant Bank, said in e-mailed comments. “The global backdrop that has turned supportive” is helping to pull “the fundamentally weak rand along.”

The rand’s three-month implied volatility against the dollar was 12.85 percent, compared with 12.29 percent a week earlier.

To contact the reporter on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.