Bloomberg News

Rand Rallies as World Bank Growth Forecast Boosts Debt Allure

June 13, 2013

The rand rallied after the World Bank cut its forecast for global growth, easing concern central banks are preparing to curtail monetary stimulus that fueled demand for emerging-market assets.

U.S. Treasuries rose alongside Japanese and Australian bonds after the World Bank pared its projections for economic expansion in 2013 to 2.2 percent from a January estimate of 2.4 percent. Foreign investors were net buyers of South African bonds yesterday after four straight days of outflows.

“The sell-off in emerging-market debt has eased,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments. “This is very apparent in our market, where Tuesday’s drop-back in yields across the curve has been sustained.”

South Africa’s currency gained 1.4 percent to 9.9751 per dollar as of 11:40 a.m. in Johannesburg. Yields on benchmark 10.5 percent bonds due December 2026 fell three basis points, or 0.03 percentage point, to 7.92 percent, after dropping 32 basis points in the previous two days.

Foreign investors bought a net 1.95 billion rand ($194 million) of South African bonds yesterday, resulting in net inflows this month of 291 million rand after outflows of 4.71 billion rand in May, according to JSE Ltd. data.

South Africa’s benchmark stock index dropped 1 percent to the lowest level since May 3.

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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