Zuma vs Gordhan: Govt bonds extend losses, Rand firms

By Olivia Kumwenda-Mtambo

JOHANNESBURG, Feb 29 (Reuters) – South Africa’s rand recovered some ground on Monday after falling 4 percent on Friday due to a row involving the finance minister, but government bonds fell.

Finance Minister Pravin Gordhan said there were attempts to discredit him and the integrity of the Treasury, sending the rand falling to its biggest daily loss since 2011 on Friday.

Rand_Child_SliderGordhan’s statement followed a newspaper report which quoted sources as saying he had threatened to resign after receiving a letter from the elite Hawks police unit questioning his knowledge of a suspected rogue unit at the revenue service.

This followed reports of a clash between Gordhan and the head of the South African Revenue Service (SARS).

The rand firmed 1 percent against the dollar, but investors remained cautious. As of 1030 GMT it was trading at 16.0675 versus the dollar, 0.57 percent firmer from Friday’s New York close of 16.1600.

“There is a bit of consolidation after the steep sell off on Friday. Markets are now taking a bit of a wait-and-see approach,” said ETM Analytics economist Jana van Deventer.

“They have already priced in a risk premium to the currency. The rand is trading at its weakest levels against the dollar since early February and we probably have to see some concrete news on the (Gordhan) front if the rand is to show more material reaction.”

Read also: Zuma v Gordhan down to the wire: President encourages Hawks investigation

The yield on the benchmark instrument due in 2026 soared as much as 28 basis points in early trade, according to Thomson Reuters data, extending the previous week’s losses. By 1030 GMT, the yield rose 11 basis points to 9.475 percent.

“Headlines about feud between top men at National Treasury and SARS are not helping sentiment toward South African assets,” NKC African Economics said in a note.

The rand’s weakness comes ahead of some key data. SARS is expected to release January trade data at 1200 GMT on Monday and Statistics South Africa will release fourth quarter GDP numbers on Tuesday.

On the stock market, the Top-40 index was flat at 0.04 percent, while the broader All-share inched 0.15 percent higher by 1035 GMT.

Barclays Africa Group Ltd fell as much 6 percent when the market opened, and traded nearly 5 percent lower after Barclays Plc said on Sunday its board was evaluating strategic options in relation to its shareholding in its African business.