South Africa\u2019s rand weakened to a three-month low against the dollar, and yields on benchmark government bonds hit record highs amid a selloff fueled by concern about the country\u2019s fiscal outlook as well as the risk-off mood globally.<\/p>\n\n\n\n
The rand fell a fourth day on Thursday, its longest streak in six weeks, to its weakest level since June against the dollar at around R19.20. <\/p>\n\n\n\n
Yields rose all along the curve, with those on 2035 securities climbing above 12.5% for the first time. It could be worse without the support of the highest central bank policy rate in 14 years, according to Citigroup Inc.<\/p>\n\n\n\n
\u201cRand lovers \u2014 if any \u2014 should be glad the South African Reserve Bank is probably going to be one of the last central banks to cut rates in this cycle,\u201d Citigroup analysts Luis Costa and Bhumika Gupta wrote in a note to clients. <\/p>\n\n\n\n
\u201cWithout a cautious SARB, ZAR could be far above R20.\u201d<\/strong><\/p>\n\n\n\n The Reserve Bank left its benchmark rate unchanged last week, but hawkish comments from Governor Lesetja Kganyago prompted money markets to price in 42 basis points of increases over the next two meetings.<\/p>\n\n\n\n Rising US Treasury yields and a resurgent dollar have hurt riskier assets worldwide, as a surge in oil prices stoke expectations of higher-for-longer interest rates in the world\u2019s largest economy.<\/p>\n\n\n\n Locally, investors are concerned about holes in the nation\u2019s budget, which the central bank said will force local rates to remain elevated for some time to come. <\/p>\n\n\n\n Yields on 2035 notes rose 18 basis points Thursday to trade at 12.59%, the weakest performance outside of Hungary on Thursday, out of the 26 local markets monitored by Bloomberg.<\/p>\n\n\n\n The government bond market saw net outflows of 5.1 billion rand ($266 million) on Wednesday, the most in a day since July 22.<\/p>\n\n\n\n \u201cRand bulls continue to struggle,\u201d analysts at Rand Merchant Bank wrote in a note to clients. \u201cThe local bond market remains topside-yield-focused, with US Treasury yields hitting fresh highs, a weaker rand and concerns about SA Inc.\u2019s fiscal position all providing the fuel for short positions.\u201d<\/p>\n\n\n\n
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