The eye-popping prediction that the proportion of government debt to gross domestic product would top 60% by 2024 sent the rand down as much as 2.3%, wiping out this year's gains. The yield on the nation's debt due 2026 briefly pierced the 9% level.
But a rescue plan for foundering power utility Eskom Holdings SOC Ltd. calmed traders' nerves as it appeared to avert a South African credit-rating downgrade from Moody's Investors Service, at least for now. Eskom, which supplies 95% of the country's electricity, will receive a R69bn ($4.9bn) cash injection over the next three years to help service its debt. Part of the utility's transmission business will also be sold to private investors.
"Moody's should like this," said Geoff Kendrick, a London-based strategist at Standard Chartered, which took profit on its position in the lira versus rand cross.
The rand was trading 0.1% lower as of 4:53pm in Johannesburg, and the yield on government debt due 2026 declined three basis points to 8.84%. Bearish bets on the rand, which were the highest in emerging markets before Mboweni's speech are now second to Turkey's lira. The currency's one-week 25 Delta risk reversal narrowed by the most since Jan. 17.
