South African bonds fell for a second day, stalling a rally that drove yields to record lows, as investors sold riskier assets on concern Europe’s debt crisis is set to worsen.
Yields on benchmark 6.75 percent bonds due 2021 rose 15 basis points to 6.77 percent as of 1:30 p.m. in Johannesburg, adding to yesterday’s 12 basis-point gain. Yields tumbled 32 basis points in two days to 6.50 percent, a record low, on July 20, after the central bank unexpectedly cut its benchmark repurchase rate on July 19. Yields have declined 121 basis points this year.
Moody’s lowered the outlooks on the Aaa credit ratings of Germany, the Netherlands and Luxembourg yesterday, citing the “rising uncertainty” about Europe’s debt crisis. Spain’s bailout of its regions pushed the nation closer to a full international rescue after 10-year borrowing costs climbed to a euro-era record of 7.58 percent.
The rise in South Africa’s yields “highlighted, once again, the significant impact that international developments are playing in the local interest rate market,” Theuns de Wet and Mamello Matikinca, analysts at Rand Merchant Bank in Johannesburg, wrote in e-mailed comments. “With global risk appetite falling, bond yields moved higher.”
South African bonds have returned 12 percent this year, the fourth-best performance out of 26 nations tracked by Bloomberg/EFFAS indexes.