Foreigners bought a net 8.68 billion rand ($878 million) of South African debt last month following outflows of 11.1 billion rand in May and June, the most over two months since September 2011, according to Johannesburg Stock Exchange data. South African 10-year bond yields rose 21 basis points in July, compared with an increase of 23 in Hungary and 44 in Turkey.
Emerging-market bond rates have surged since May 22, when Fed Chairman Ben S. Bernanke signaled that policy makers may begin tapering U.S. asset purchases that helped spur demand for higher-yielding debt. While U.S. gross domestic product growth beat forecasts in the second quarter, the Fed said two days ago it will maintain its $85 billion of monthly quantitative easing. South Africa’s central bank has left its benchmark rate at a three-decade low for more than a year after growth slumped.
“There is still some uncertainty as to what the Fed will do, but even if they start to taper it won’t be a significant move away from their accommodative policy,” Sean McCalgan, head of real-time research at ETM Analytics in Johannesburg, said by phone yesterday. “The market may have overpriced its expectations. That is important for the local bond market.”
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