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South Africa Bond Yields Rise Most in a Month as Rand Fluctuates

Dec. 14 (Bloomberg) -- South African bond yields climbed the most in a month before the start of the ruling African National Congress elective conference next week. The rand fluctuated between gains and losses.

Yields on benchmark 10.5 percent bonds due December 2026 rose five basis points, or 0.05 percentage point, to 7.35 percent as of 3:45 p.m. in Johannesburg, the biggest one-day increase since Nov. 15 and erasing declines in the previous four days. The rand traded little changed at 8.6601 per dollar, after advancing as much as 0.3 percent and slipping as much as 0.2 percent. The currency slid less than 0.1 percent this week.

ANC members meeting in the central city of Bloemfontein from Dec. 16 to 20 will discuss proposals that could boost costs for operators in the world’s biggest producer of platinum and chrome, hampering efforts to cut a 25.5 percent jobless rate and risking sovereign-rating downgrades toward junk levels. Moody’s Investors Service downgraded South African on Sept. 27, with Standard & Poor’s following two weeks later, while both kept the debt on negative outlook. Fitch Ratings said it’s reviewing the country early next year.

The downgrades reflect investor concerns that “are still there and they’re probably valid,” Andre Roux, head of fixed-income investments at Investec Asset Management Ltd. in Cape Town, said by telephone. “They’ll be in the market for a while.”

The rand erased gains as importers bought dollars, taking advantage of the currency’s advance to a month-high before the start of Christmas holidays, said Ion de Vleeschauwer, chief dealer at Bidvest Bank Ltd. in Johannesburg. Dec. 17 is a public holiday in South Africa.

“The rand has been in a tight holiday range,” De Vleeschauwer said. “We’ve seen strong importer demand toward” 8.60 per dollar, he said.

China Data

The rand had been boosted by a report signalling that manufacturing may expand at a faster pace this month in China, the biggest buyer of South African raw materials.

A preliminary purchasing managers’ index for China by HSBC Holdings Plc and Markit Economics showed a reading of 50.9, higher than a median estimate of 50.8 in a Bloomberg News survey. A figure above 50 indicates an expansion. The U.S. Federal Reserve said yesterday it will expand its bond buying program and keep interest rates low until unemployment falls, further boosting demand for commodities and riskier assets.

The S&P GSCI Index of raw materials advanced as prices of metals including copper and platinum gained. Metals and other commodities account for 45 percent of South Africa’s exports, according to government data.

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

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