South Africa’s decision to replace nuts and lentils with vodka and cheese in the consumer price index is damping chances of slower inflation and a recovery for the world’s worst-performing bond market.
South African government bonds were the worst performers last week as spreading labor unrest, the first rating downgrade since apartheid and a widening trade deficit overshadowed the debt’s inclusion in a benchmark index.
The rand surged to a two-week high against the dollar after South African Finance Minister Pravin Gordhan indicated the government may intervene in the foreign- exchange market to reduce swings in the currency.
Namibia’s debut rand bond sale, the first by a foreign government, will probably prompt other African nations to sell bonds in the South African currency, lured by an investment industry overseeing $600 billion of assets.
South African bonds lured more foreign inflows in 2010 than shares for the first time after the fall of apartheid in 1994 as yields more than double those of 10-year U.S. Treasuries boosted the appeal of the debt.