Bond Yields Hit Week High as Rand Fluctuates on Growth Concerns

South African bond yields rose to the highest in a week amid concern that lower commodity prices and labor disputes in the mining industry will slow growth. The rand fluctuated between gains and losses.

Gold retreated to the lowest in three weeks and copper fell on speculation that the Federal Reserve will start to reduce bond purchases as the U.S. economy improves. Johannesburg-based AngloGold Ashanti Ltd. (ANG), the third-largest producer of the metal, is cutting capital expenditure and slowing output after reporting a second-quarter loss, it said today. Workers at South Africa’s biggest gold processor, Rand Refinery, went on strike on Aug. 5 after pay talks stalled.

“Ongoing domestic wage negotiations and the vulnerable fiscal position” are contributing to rising bond yields, Carmen Nel, a Cape Town-based analyst at Rand Merchant Bank, said in a note. “Upward pressure should persist in the short-term due to rising local inflation, strong U.S. data and the pending announcement of Fed tapering in September.”

Yields on benchmark 10.5 percent bonds due December 2026 rose two basis points, or 0.02 percentage point, to 8.20 percent by 4:25 p.m. in Johannesburg, the highest on a closing basis since July 29. South Africa’s currency gained as much as 0.6 percent and weakened 0.3 percent before trading at 9.9090 per dollar.

The FTSE/JSE Africa All Share Index (JALSH) declined for a second day, led by miners including AngloGold and BHP Billiton Plc. Metals and other commodities account for more than 50 percent of South Africa’s exports, according to government data.

South Africa’s gold and foreign-currency reserves rose in July after the price of bullion increased. Gross reserves gained to $47.3 billion last month from $47 billion in June, the South African Reserve Bank said today.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

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

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