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South Africa Yields Rise on U.S. Shutdown as Rand Fluctuates

Oct. 7 (Bloomberg) -- South African bond yields rose as investor appetite for riskier assets waned while U.S. lawmakers wrangled over the nation’s debt ceiling and government shutdown. The rand moved between gains and losses against the dollar.

The U.S. will exhaust measures to avoid breaching its debt ceiling on Oct. 17. House of Representatives Speaker John Boehner said lawmakers won’t raise the limit without packaging it with other provisions, a position opposed by President Barack Obama. South Africa’s net foreign-currency and gold reserves rose in September in line with estimates, the central bank reported today.

“Markets are focused almost exclusively on the U.S. government shutdown,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “With no progress over the weekend, risk aversion is starting to rise” and weigh on the South African currency, he said.

Yields on benchmark 10.5 percent bonds due December 2026 rose three basis points, or 0.03 percentage point, to 8.04 percent by 4:50 p.m. in Johannesburg. The rand gained less than 0.1 percent to 9.9858 per dollar after depreciating as much as 0.6 percent.

Treasury Secretary Jacob J. Lew, who made appearances on four of the major Sunday TV talk shows, said the administration would only be willing to negotiate after a partial government shutdown, now in its sixth day, comes to an end and the debt ceiling is increased. He also warned of the dangers of default.

Exporters Benefit

South Africa’s net reserves increased 0.4 percent last month to $45.75 billion, in line with the $45.8 billion median estimate of five economists in a Bloomberg survey. Gross reserves climbed to $50.02 billion last month from $47.95 billion in August after the National Treasury raised $2 billion in an international bond issue, the Reserve Bank said.

“We continue to find very little evidence of significant outright foreign-exchange intervention activity by the authorities in September,” Jeffrey Schultz, a Johannesburg-based economist at BNP Paribas Cadiz Securities, said in an e-mail.

While the Reserve Bank has been accumulating foreign currency to help protect against swings in the rand, the institution has said it will not attempt to interfere in the level of the currency.

The rand’s 16 percent slide against the dollar this year is benefiting exporters and authorities don’t have the resources to influence the currency, South African Finance Minister Pravin Gordhan said.

“There are some signs that the more agile exporters are taking opportunities now that they couldn’t take two years ago or a year ago,” Gordhan said today in an interview in London with Manus Cranny and Francine Lacqua on Bloomberg TV’s ‘The Pulse’ show. “We would appreciate less volatility, particularly for players in the real economy who require more stability, more certainty.”

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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