The rand strengthened for a second day and yields on South Africa’s nine-year bonds reached the lowest in two weeks after metal prices advanced as China eased reserve requirements, boosting export prospects for the world’s largest producer of platinum.
South Africa’s currency appreciated as much as 1.3 percent and traded 0.9 percent stronger at 7.6733 as of 4:43 p.m. in Johannesburg. It gained 0.1 percent to 10.1683 against the euro. Bonds climbed for a second day and the cost of insuring the nation’s debt fell to a 3 1/2-month low.
The rand and bonds benefited as China, South Africa’s biggest single trading partner, said the proportion of cash that lenders must set aside will fall half a percentage point from Feb. 24, the second reduction in three months to sustain growth. South Africa, which also has the world’s largest reserves of manganese and chrome, derived 64 percent of exports from commodities in 2011, according to government data.
“When one of South Africa’s biggest sources of demand for resource-related exports is looking to protect its strong growth rate this must be positive for the rand,” George Glynos, an analyst at ETM Analytics in Johannesburg, said in e-mailed comments. “Any effort to bolster growth will be supportive of the rand.”
Standard & Poor’s GSCI index of commodity prices rose for a third day to its highest in more than six months as the prices of metals including platinum, copper and nickel gained.
“With risk very much back on, the rand is likely to extend its gains in the short term,” Nomvuyo Guma, a currency strategist at Standard Bank Group Ltd. in Johannesburg, said in e-mailed comments.
Credit default swaps for South Africa’s dollar-denominated sovereign bonds fell 5.3 basis points to 172.4 today, according to data compiled by CMA, a unit of CME Group Inc. The contracts, which drop as perceptions of creditworthiness improve, traded below default swaps from higher-rated France and Israel at 180.9 and 187.2, respectively.
South African bonds gained ahead of consumer data and Finance Minister Pravin Gordhan’s budget speech, both due on Feb. 22. The consumer inflation rate probably rose 6.2 percent in January, according to the median estimate of nine economists in a Bloomberg survey. The central bank aims to keep inflation below 6 percent.
Transnet SOC Ltd., South Africa’s state-owned ports and freight-rail operator, will raise as much as 100 billion rand ($13 billion) of planned capital expenditure in domestic and international bond markets, Chief Executive Officer Brian Molefe said today. The expenditure is part of a 300 billion rand infrastructure plan announced by President Jacob Zuma on Feb. 9.
The yield on South Africa’s 77 billion rand of 6.75 percent bonds due 2021 dropped three basis points, or 0.03 percentage point, to 7.78 percent, the lowest on a closing basis since Feb. 7.
“The major focus for bonds in the week ahead will be the January CPI data and Finance Minister Gordhan’s budget speech,” Glynos said. “Players will be keeping an eye on how the government intends to finance the R300 billion worth of infrastructure.”
The nation’s $1.5 billion of 4.665 percent bonds due 2024 gained the most in a week, driving the yield down 6.6 basis points to 4.23 percent. The extra yield investors demand to hold the bonds rather than U.S. Treasuries of similar maturity narrowed six basis points to 2.24 percentage points. The spread has narrowed from 2.7 percentage points when the bonds were first sold on Jan. 17.