South African Bonds Drop as Consumer Confidence Hits Decade Low

South African bonds declined after consumer confidence dropped to the lowest in 10 years on record gasoline prices and local labor unrest. The rand strengthened for the first time in three days.

The FNB/RMB index dropped 9 points to minus 8 in the third quarter as sentiment across all income groups fell, Johannesburg-based First National Bank and the Bureau for Economic Research said in a statement yesterday. The rand’s plunge against the dollar this year spurred increases in gasoline prices of 6.8 percent in July and 2.4 percent last month. The country relies on imports for 70 percent of its oil.

“The local economy continues to struggle with ongoing strike action in various sectors as well as weak fundamentals,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. (NED) in Johannesburg, said in an e-mailed note today.

Yields on South Africa’s 10.5 percent rand-denominated government bonds due December 2026 rose six basis points, or 0.06 percentage point, to 7.95 percent, the highest on a closing basis in almost a week. The rand gained 0.2 percent to 9.9732 per dollar by 10:55 a.m. in Johannesburg, after weakening 1.2 percent yesterday.

South African’s economy is forecast to expand 2 percent this year, the slowest since a 2009 recession, according to the central bank. Labor unrest at the country’s mines, including platinum, gold and coal, has shaved 0.3 percentage point off expansion this year, President Jacob Zuma said in June.

Inflation (SACPIYOY) is forecast to be an average of 5.9 percent this year, Reserve Bank Governor Gill Marcus said on Sept. 19. Consumer-price inflation accelerated to 6.4 percent in August.

Producer-price inflation for the month slowed to 6.5 percent from 6.6 percent in July, a report from Statistics South Africa will probably show at 11:30 a.m., according to the median estimate of seven economists surveyed by Bloomberg.

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

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.