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South African Bonds Gain for Fifth Day Backed by Foreign Buyers

South African government bonds gained for a fifth day as investors took advantage of a weaker rand to buy up the debt of the biggest economy on the continent.

Yields on the benchmark 10.5 percent government bond due December 2026 dropped 10 basis points, or 0.1 percentage point, to 7.19 percent, its lowest level on a closing basis since Jan. 17. The rand, which reached a four-year low on March 21 of 9.3666 per dollar, traded 0.1 percent stronger at 9.1566 by 11:30 a.m. in Johannesburg.

“The bond market had a nice rally over the last week,” Brigid Taylor, head of institutional sales at Nedbank Group Ltd., said by phone. “When the rand was above 9.30 a dollar we saw lots of foreigners coming in buying shares and bonds. That drove the yields lower.”

South Africa’s National Treasury plans to sell 2.3 billion rand ($251 million) of bonds next week, while state-owned power utility Eskom Holdings SOC Ltd. said it wants to raise 400 million rand in debt. The government will sell 800 million rand of inflation-linked bills at its weekly auction today.

The European Central Bank decided to keep its benchmark interest rate unchanged yesterday while the Bank of England said it will continue buying as much as 375 billion pounds ($571 billion) in assets.

The rand remained relatively sheltered from what happened in the European space, Taylor said. It will take some kind of “event risk for the rand to break out of the 9.12 a dollar to 9.30 a dollar range,” she said.

The rand is the worst performer behind the Japanese yen among 16 major currencies tracked by Bloomberg. It lost 7.4 percent against the dollar since the start of the year.

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

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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