Rand Gains Most in Six Months as EU Deal Boosts Risk Appetite

The rand surged the most in six months and bond yields fell to records as stocks and commodities rallied after European leaders agreed on measures to support Spain’s banks, boosting demand for riskier assets.

South Africa’s currency gained as much as 2.7 percent, the most on an intraday basis since Nov. 30. It traded 2.6 percent stronger at 8.1871 per dollar as of 3 p.m. in Johannesburg, paring its depreciation this quarter to 6.3 percent. Yields on South Africa’s 6.75 percent bonds due 2021 dropped four basis points, or 0.04 percentage point, to 7.22 percent, the lowest on a closing basis on record. The yield has declined 76 basis points this half.

Leaders of the 17 euro countries gather today for a second day of talks to discuss measures to stem a debt crisis that’s spurred five euro members to seek international bailouts. Yesterday, leaders moved closer to solving the immediate crisis, dropping requirements that governments received preferred creditor status on crisis loans to Spain’s banks and relaxing conditions on potential help for Italy. The euro area buys 22 percent of South Africa’s exports.

“Sentiment has improved and will help risk assets generally to recover,” Quinten Bertenshaw, a Johannesburg-based analyst at Tradition Analytics, wrote in e-mailed comments. “The risk-on behavior has counted against the dollar this morning and is well reflected in the crosses including the dollar-rand.”

Stocks Climb

Emerging-market stocks climbed the most in 18 months and the Standard & Poor’s GSCI Index of raw materials had the biggest jump since January. Commodities account for 45 percent of South Africa’s exports.

South Africa’s benchmark stock gauge advanced for the first time in three days as commodity exporters, including Anglo American Plc and BHP Billiton Ltd., gained.

The rand stayed stronger after private-sector credit growth accelerated to 8.3 percent in May from 7.3 percent the previous month, beating the 8 percent median estimate of economists in a Bloomberg survey. Credit growth wasn’t enough to put pressure on the central bank to raise interest rates, said Tertia Jacobs, an economist at Investec Ltd. in Johannesburg.

“The trend in private-sector credit extension remains neutral for interest rates, with developments in the euro zone one of the key determinants of domestic monetary policy,” Jacobs wrote in e-mailed comments. Investec expects the central bank to leave the benchmark repurchase rate at 5.5 percent “until late 2013”, she added.

Yields on South Africa’s $1 billion of 5.875 percent bonds due 2022 dropped six basis points to 3.53 percent, the lowest on record. The extra yield investors demand to hold the debt rather than U.S. Treasuries declined by 11 basis points to 213.

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