Bloomberg News

South Africa Inflation-Linked Yields Fall to 1-Month Low

July 22, 2011

(Updates with analyst’s comment from second paragraph.)

July 22 (Bloomberg) -- South African inflation-linked bond yields fell to the lowest levels in more than a month at a weekly government auction of the debt after the central bank said inflation will rise above its target level this year.

The Pretoria-based Reserve Bank sold 600 million rand ($89 million) of linkers, as the bonds are called, with investors bidding for 2.7 times the amount, according to the central bank’s data on Bloomberg. The average yield on the 2.6 percent securities maturing in 2028 fell to 2.6 percent, the lowest since the auction of June 3, from 2.65 percent at last week’s auction.

The consumer price index of Africa’s largest economy rose to 5 percent in June, the highest in 15 months, from 4.6 percent in April, the Pretoria-based statistics agency said on July 20. The rate will breach the 6 percent target in the fourth quarter, and average 6.3 percent in 2012, Central Bank Governor Gill Marcus said yesterday.

“Given the 5 percent CPI print this week, we expect the auction to clear at market levels or slightly stronger,” Rand Merchant Bank analysts led by Theuns de Wet said in a research note before today’s auction.

In addition to 170 million rand of 2.6 percent linkers due 2028, the central bank sold 280 million rand of 2.75 percent notes due 2022 at an average yield of 2.55 percent down from 2.58 percent at the previous auction, and 150 million rand of 3.45 percent bonds due 2033 at 2.585 percent, from 2.6 percent.

--Editors: Ana Monteiro, Linda Shen

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

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


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