South African bond yields rose to the highest in two weeks and the rand gained after inflation accelerated faster than expected, reducing the central bank’s room to stimulate the economy by cutting interest rates.
Rates on 13.5 percent bonds due September 2015 climbed six basis points to 5.46 percent at 4:03 p.m. in Johannesburg, the highest since Oct. 9. The rand advanced as much as 0.4 percent and traded less than 0.1 percent stronger at 8.7698 per dollar.
The inflation rate rose to 5.5 percent last month from 5 percent in August, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 20 economists was 5.2 percent. The Reserve Bank left its benchmark interest rate unchanged at 5 percent on Sept. 20, after reducing it by half a percentage point in July, concerned that rising food and fuel costs will drive up prices in the economy.
“With everyone thinking that further stimulus for South Africa could only come in the form of further Reserve Bank easing, this inflation print is very significant,” Razia Khan, the London-based head of Africa economic research at Standard Chartered Plc, said in e-mailed comments. “This will make for uncomfortable reading for the Reserve Bank, given currency-related risks that must now be factored in as well.”
The central bank’s target is to keep inflation within a range of 3 percent to 6 percent. Forward-rate agreements starting in six months, used to speculate on borrowing costs, jumped 14 basis points to 4.94 percent as traders pared bets on another interest-rate cut that would reduce the rand’s rate advantage over the dollar.