Bloomberg News

South Africa CPI-Linked Bond Auction Yields at 8-Week High

July 01, 2011

(Updates with central bank comment from third paragraph.)

July 1 (Bloomberg) -- South African inflation-linked bond yields rose to the highest in eight weeks at an auction of the debt, after the central bank said the economic recovery remains fragile and higher domestic spending isn’t pushing up prices.

The Pretoria-based Reserve Bank sold 600 million rand ($88.9 million) of the debt maturing in 2022, 2028 and 2033, according to its data on Bloomberg. Average yields were the highest since the auction on May 6.

South Africa’s purchasing managers index fell in June to its lowest level this year, adding to evidence that inflationary pressures in the economy are abating. The nation’s consumer price index rose to 4.6 percent in May, from 4.2 percent the previous month, the Pretoria-based statistics agency said on June 22.

“I don’t think we will see demand-side pressures coming into the economy any time soon,” Monde Mnyande, the chief economist of the Reserve Bank, said in an interview in Pretoria, the capital, after the release of the bank’s annual economic report today.

Interest payments on inflation-linked bonds are indexed to the consumer price index. The bonds pay more interest if inflation rises.

The central bank auctioned 95 million rand of 2.75 percent inflation-linked notes due 2022 at an average yield of 2.58 percent, three basis points, or 0.03 percentage points, higher than at the previous auction on June 24. It sold 210 million rand of 2.6 percent linkers due 2028 at a yield of 2.62 percent, one basis point higher than the previous sale, and 295 million rand of 3.45 percent notes maturing in 2033 at a yield of 2.57 percent, two basis points up from June 24.

--Editors: Ana Monteiro, Linda Shen

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

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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