South African bonds declined, driving yields on benchmark 13-year notes to six-week highs, on concern inflation will accelerate as the nation’s current- account shortfall weakens the rand. The currency fluctuated.
Yields on 10.5 percent bonds due December 2026 climbed five basis points, or 0.05 percentage point, to 7.44 percent at 9:20 a.m. in Johannesburg, the highest since Jan. 30. The rand gained 0.1 percent to 9.1572 per dollar after slumping as much as 1.3 percent yesterday to a four-year low.
South Africa posted a current-account deficit close to a four-year high in the fourth quarter, the Reserve Bank said yesterday, undermining the rand and adding to price pressures in Africa’s biggest economy. The nation relies mainly on foreign investment in stocks and bonds to fund the deficit, inflows that have fluctuated this year as global growth slowed and investors’ risk perceptions increased.
“The external financing requirement poses a significant risk,” Carmen Nel, a Cape Town-based economist at Rand Merchant Bank, said in e-mailed comments. “The latest trade figures suggest that the current account should remain under pressure.”
The monthly trade deficit swelled to a record in January. Exports may come under pressure again this year as stoppages at Exxaro Resources Ltd. (EXX) coal mines highlight the risk of more wildcat strikes in the mining industry, which accounts for 53 percent of export earnings.
The current-account deficit “implies growing risks for the rand, given that the shortfall is sustainable only as long as foreign investors are willing to fund it,” Shireen Darmalingam, an analyst at Standard Bank Group Ltd. in Johannesburg, said in a research note e-mailed to clients today.
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