Bloomberg News

Rand Set for Weekly Drop as Yields Rise After Greek Debt Swap

March 09, 2012

The rand fell for the first time in three days, set for its first weekly decline in four, after Greece forced investors to take part in its debt swap, damping demand for riskier assets including South African bonds.

The currency of Africa’s biggest economy weakened 0.6 percent to 7.5285 per dollar as of 2:10 p.m. in Johannesburg, retreating from a one-week high. The rand is down 0.1 percent this week, its first such drop since Feb. 10. The yield on the 77 billion rand of 6.75 percent bonds due 2021 rose two basis points, or 0.02 percentage point, to 7.85 percent. The nation’s dollar-bond spreads over U.S. Treasuries widened to the most in more than a week.

Investors with 95.7 percent of Greece’s privately held bonds will participate in the swap after so-called collective action clauses are triggered, the Greek Finance Ministry said. Germany and fellow euro-area governments declared the debt swap a success. U.S. payrolls probably increased by 210,000 in February, down from 243,000 the previous month, economists said before a Labor Department report today.

“I think people are just a bit wary and saying maybe it’s time to take a bit of profit” following the rand’s 1.5 percent advance yesterday, Ion de Vleeschauwer, the Johannesburg-based chief dealer at Bidvest Bank, said by phone. “Today can be a volatile day with the U.S. numbers.”

Attention now shifts to euro-region finance ministers, who must decide whether the swap justifies proceeding with a 130 billion-euro ($172 billion) second bailout. Officials from the International Swaps and Derivatives Association meet today to consider a “potential credit event” relating to Greece.

“This will not be the end of Greece’s problems,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. For the rand to resume gains, “we will have to have a decent U.S. jobs report this afternoon”, he added.

The yield on South Africa’s $1.5 billion of 4.665 percent bonds due 2024 rose four basis points to 4.23 percent, the highest since Feb. 28. The extra yield investors demand to hold the debt rather than U.S. Treasuries widened four basis points to 223 basis points, the most since Feb. 28.

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

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


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