S. Africa to Auction Linkers Amid Signs Inflation ‘Contained’

South Africa is offering 600 million rand ($90 million) of inflation-linked bonds tomorrow after the central bank said price growth in Africa’s biggest economy is “well-contained.”

The Pretoria-based central bank will auction inflation-linked debt maturing in 2017, 2022 and 2033 at its weekly auction, it said on its Bloomberg page. The bonds, known as linkers, pay interest on a principal amount that is indexed to the consumer price index. When inflation is low, their value declines relative to fixed-interest debt.

Rising oil prices probably won’t push inflation higher than the Reserve Bank’s 3 percent to 6 percent target range, Gerhard van den Heever, the central bank’s deputy chief economist, told lawmakers in Cape Town yesterday. The bank said on March 24 it expects the inflation rate to average 4.7 percent in 2011 and 5.7 percent in 2012. The rate was unchanged at 3.7 percent in February.

“The oil price has gone right through the roof again,” Van den Heever said. “It is not the end of the world. Other factors have made inflation slow down quite nicely. We are confident that this negative impact from the oil price will be dealt with adequately.”

Inflation may quicken to an annual 5.79 percent over the next two years, according to the yield difference, or breakeven rate, between two-year inflation-linked bonds and standard notes of similar maturity.

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