Large bond outflows and waning demand for the debt from domestic investors are putting pressure on the local market, with record fuel prices adding to inflation. Moneyweb inflation rand
South Africa’s rand and bonds gained in May — but there are signs that the picture is about to darken. Large bond outflows and waning demand for the debt from domestic investors are putting pressure on the local market, with record fuel prices adding to inflation that’s already close to the central bank’s target range. Aggressive monetary tightening by developed-nation central banks could add to pressure on the rand.
Demand from local investors underpinned bond gains in May, but that’s not a given, with this week’s Treasury auction raising a red flag. Primary dealers placed orders for just R7.4 billion of debt, or 1.9 times the R3.9 billion on sale. That was the weakest demand since October, according to data compiled by Bloomberg.
Investors are also worried about fiscal pressures. Africa’s most industrialised economy extended a fuel subsidy by two months to help cushion consumers and businesses against the impact of rising crude prices stemming from Russia’s war with Ukraine. Read: Temporary fuel levy relief will be withdrawn from August The additional relief will cost the state R4.5 billion in foregone revenue.
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