Bloomberg News

South African Bonds Gain 1st Day in 5 as Euro Debt Concern Eases

September 15, 2011

Sept. 15 (Bloomberg) -- South African bonds gained for the first time in five days after German and French leaders said they’re certain Greece will remain in the euro zone. The rand declined for a second day against the euro.

The 6.75 percent securities due 2021 added 25 cents to 91.264 rand, driving the yield down four basis points, or 0.04 percentage point, to 8.083 percent as of 11:05 a.m. in Johannesburg. The rand retreated 0.7 percent to 10.2278 per euro, and traded 0.2 percent lower versus the dollar at 7.4273.

Chancellor Angela Merkel and President Nicolas Sarkozy yesterday signaled they’re ready to keep supporting Greece, easing concern that a Greek default may lead to a funding crisis for European banks and boosting demand for riskier, emerging- market assets.

“The news would have gone some way to restoring confidence,” Tradition Analytics strategists led by Johannesburg-based Quinten Bertenshaw wrote in a research note. “Levels of risk aversion have subsided” though “the euro zone is not out of the woods yet,” they added.

Today’s gains pared the biggest five-day drop for South African bonds since October 2008 as investors shunned riskier, high-yielding assets on concern Europe’s debt crisis will raise borrowing costs for the region’s banks.

Global investors sold a net 10.8 billion rand ($1.5 billion) of South African stocks and bonds in the first three days of this week, according to data from JSE Ltd., which manages the country’s stock and debt exchanges. The European Central Bank said on Sept. 14 it will lend dollars to two euro- area banks, a sign they are finding it difficult to borrow in the U.S. currency markets, while Credit Agricole SA and Societe Generale SA had their long-term credit ratings cut one level by Moody’s Investors Service.

The sell-off “could relate to an unwinding of leveraged plays as the euro zone banking crisis intensifies,” John Cairns and Nema Ramkhelawan-Bhana, currency strategists at Rand Merchant Bank in Johannesburg, wrote in a research note. “If bond inflows stop or reverse, then we’ll have to become a lot more bearish on the rand.”

--Editors: Ana Monteiro, James M. Gomez

To contact the reporter on this story: Robert Brand in Cape Town at

To contact the editor responsible for this story: Gavin Serkin at

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