Rand slumps to 10-week low on longest bond selloff since May

South Africa’s rand slumped to the weakest level in two and a half months against the dollar as a bond sell off reached the longest streak since May, fuelled by concern the nation won’t earn enough foreign investment to plug its current-account deficit.

Foreign investors sold a net R1.03-billion of debt on Monday on concern the Federal Reserve is set to cut monetary stimulus as the US economy recovers. That was the sixth straight day of outflows, bringing net sales this month to R5.53-billion.

South Africa relies on bond and equity inflows to help finance the gap in its current account, which may average 6.5% of gross domestic product this year, according to government forecasts.

“There is good reason for the rand to weaken,” Jonathan Meyerson, head of fixed-income investments at Cadiz Holdings, which manages R40-billion, said by phone from Cape Town. “We need to fund the current-account deficit and the budget deficit so we need the foreigners to bring in those funds.”

The rand depreciated 0.7% to 10.4328, the weakest level since August 28 on an intraday basis, at 10:40 am in Johannesburg.

Yields on benchmark government bonds due December 2026 climbed seven basis points, or 0.07 percentage point, to 8.39%, the highest on a closing basis since September 6. – Bloomberg

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