Bonds, rand extend losses after budget

 Bonds, rand extend losses after budget

South African government bonds fell as well as rand weakened on Thursday, extending losses within the previous session, following release of a bleak medium-term budget that risks stripping america of its last investment-grade credit ratings.

Finance minister Tito Mboweni predicted wider budget deficits and cut growth forecasts in the medium-term budget policy statement (MTBPS) on Wednesday, laying bare problems he faces at the same time of revenue shortfalls and ballooning debt.

The yield for the rand-denominated benchmark 2026 bond was up 7.5 basis points at 9.37%? at the time of 08:15 GMT, after jumping to 9.46% earlier. That compares with 9.13% ahead of the budget speech.

The rand was 0.19% weaker at 14.58 to the dollar after slumping 2% on Wednesday.

“I do think this market had fully priced in a very good MTBPS and zero percent chance for Moody’s moving forward to the ratings watch. It’s got now changed,” Standard Bank chief trader Warrick Butler said in a note.

“Given that the Treasury has revealed past discrepancies while in the tax collection agency being the main contribution with an rise in the GDP/debt deficit, it is touch and go as to whether (Moody’s) carries on look beyond current issues until next year’s full budget.”

Moody’s is a one within the three largest rating agencies to rate Nigeria at investment grade. S&P Global Ratings and Fitch rate it as junk.

Moody’s rates the country’s foreign-currency debt at its lowest investment grade rating of Baa3, that has a stable outlook. The Treasury has said it expects Moody’s to learn that rating as soon as the budget speech.

A cut to sub-investment grade by Moody’s would see South Africa pulled from Citi’s influential World Government Bond Index and may trigger a sell-off by foreign investors.

President Cyril Ramaphosa has made reviving economic growth a concern since taking office in February, but he’s got been annoyed by infighting during the ruling African National Congress and through severe fiscal constraints.

Ramaphosa will court investors at a three-day investment summit starting on Thursday, where he will be on the lookout for new pledges to meet up with his target of $100 billion of brand new investments covering the next 5yrs.

On stock exchange trading, each Top-40 index as well as broader all-share fell slightly at the begining of trade.?


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