South African Bond Yields Climb to Month-High as Rand Weakens

July 25 (Bloomberg) -- South African bond yields rose to the highest level in a month as investors weighed prospects for the withdrawal of U.S. stimulus that has boosted demand for emerging-market assets. The rand weakened.

Federal Reserve Chairman Ben S. Bernanke told Congress last week that any reduction in stimulus would depend on the economy’s performance. U.S. durable goods orders climbed more than forecast in June, a report showed today, after data yesterday indicated new home sales rose to a five-year high. Foreign investors sold a net 1.1 billion rand ($113 million) of South Africa bonds yesterday after 2.44 billion rand of inflows in the previous two days, according to JSE Ltd. data.

“Global data hasn’t been helpful,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said by e-mail. “Markets are still sensitive to tapering fears.”

Yields on benchmark 10.5 percent bonds due December 2026 climbed 14 basis points, or 0.14 percentage point, to 8.14 percent as of 3:34 p.m. in Johannesburg, the highest level on a closing basis since June 26. South Africa’s currency retreated 0.1 percent to 9.7962 per dollar. The rand fell 1.1 percent yesterday, snapping a three-day streak of gains.

While Bernanke hasn’t set a calendar for reducing stimulus, 50 percent of economists surveyed by Bloomberg News between July 18 and 22 said the Fed will start trimming its $85 billion in monthly bond buying in September.

Jobless Claims

U.S. bookings for goods meant to last at least three years increased 4.2 percent, led by transportation equipment, after a revised 5.2 percent gain in May that was bigger than initially reported, the Commerce Department said today in Washington. The median forecast of 79 economists surveyed by Bloomberg called for a 1.4 percent advance.

The rand pared its decline after a separate report showed jobless claims increased more than estimated last week. Claims for unemployment benefits rose by 7,000 to 343,000, more than the 340,000 median estimate in a Bloomberg survey.

South Africa’s producer price index rose 5.9 percent in June from 4.9 percent the previous month, according to a report today. Consumer inflation slowed to 5.5 percent in June from 5.6 percent, data showed yesterday.

A weaker rand and higher fuel prices have posed the biggest risks to inflation this year, preventing the Reserve Bank from cutting the benchmark interest rate to stimulate the economy, Governor Gill Marcus said last week when she held the rate at 5 percent.

“The rise in producer prices will eventually spill over into consumer prices, but subdued and selective household demand will limit producers’ and retailers’ ability to pass cost increases onto consumers,” Nedbank Group Ltd. economist Busisiwe Radebe said in a note. “Given higher inflation and weak growth, the Reserve Bank will probably maintain its current accommodative monetary policy stance well into 2014.”

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