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South Africa Yields Rebound From 2-Month Highs; Rand Fluctuates

South African bonds gained, driving yields down from a two-month high, on speculation slowing retail sales will give the central bank room to delay raising interest rates. The rand fluctuated between gains and losses.

The pace of expansion in retail sales probably decelerated to 2.5 percent in September from 3 percent a month earlier, a report may show on Wednesday, according to the median estimate of 13 economists in a Bloomberg survey. The Reserve Bank left its benchmark repurchase rate unchanged at 5 percent since a surprise cut in July last year to support the worst growth in Africa’s biggest economy since the 2009 recession.

Yields on bonds due December 2026 dropped three basis points, or 0.03 percentage point, to 8.23 percent as of 11:05 a.m. in Johannesburg. The notes rebounded from an 18 basis-point jump on Nov. 8, the biggest one-day increase in more than two months, which was spurred by better-than-expected U.S. payrolls data. The rand was little changed at 10.3349 per dollar after gaining as much as 0.2 percent and depreciating 0.2 percent.

“The bias in retail sales growth is broadly tilted towards weakness,” Bruce Donald, a strategist at Standard Bank Group Ltd. in Johannesburg, wrote in an e-mailed note. “We expect that the Reserve Bank will leave policy settings unchanged” when it next meets on Nov. 21, he said.

Earlier, the rand weakened for a fifth day before Federal Reserve officials speak amid signs that the U.S. economy may be strong enough for the central bank to taper monetary stimulus. Fed Bank of Minneapolis President Narayana Kocherlakota and Atlanta peer Dennis Lockhart will speak tomorrow. U.S. employers added 204,000 workers in October, compared with a Bloomberg News survey median for a 120,000 gain, a report last week showed.

‘Surprised Markets’

“A number of forecasters are now suggesting the Fed may reduce its monthly asset purchases as early as its December meeting,” Theuns de Wet, head of global markets research at Rand Merchant Bank in Johannesburg, said in an e-mailed note. “Not only has the shift in market expectations driven the dollar stronger, it also hit U.S. Treasury yields. The experience of the last few months suggests that higher U.S. Treasury yields weigh on foreign appetite for South African bonds” and the rand, he said.

Foreign investors sold a net 2.05 billion rand ($199 million) of South African bonds on Nov. 8, bringing net outflows for the week to 5.08 billion rand.

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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