South Africa’s rand weakened for a fifth day and bonds slumped, driving benchmark yields to the highest in more than a year after the U.S. Federal Reserve said it may reduce monetary stimulus this year.
Fed Chairman Ben S. Bernanke said yesterday the central bank may start reducing bond purchases this year and end the program in 2014 should risks to the U.S. economy abate. A report showed manufacturing in China, the biggest buyer of South African raw materials, shrank at a faster pace this month.
“Overnight developments from the U.S. and China have knocked South African markets,” Walter de Wet, an analyst at Standard Bank Group Ltd., said in e-mailed comments. “What remains of the week could be volatile.”
South Africa’s currency declined 0.7 percent to 10.2547 per dollar by 10:57 a.m. in Johannesburg, extending yesterday’s 1.9 percent slide. Yields on benchmark 10.5 percent bonds due December 2026 jumped 44 basis points to 8.33 percent, the highest since June 5, 2012.
Yields on the securities climbed 173 basis points since May 9, when Bernanke first hinted at a reduction in Fed bond purchases, known as quantitative easing. Foreign investors sold a net 2.34 billion rand ($228 million) of South African bonds yesterday, cutting inflows this year to 22 billion rand, according to JSE Ltd. data.
The preliminary reading in China of 48.3 for a Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. May’s final reading of 49.2 was the first below 50 since October, indicating contraction.
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