(Updates rand, bonds; adds stocks)
JOHANNESBURG, Feb 26 (Reuters) – South Africa’s rand firmed on Friday in a recovery rally after a jump in U.S. treasury yields triggered a sharp slide in the previous session to a three-week low.
At 1511 GMT the rand was 0.37% stronger against the dollar at 15.0650, having slipped more than 4% on Thursday to its weakest since Feb. 4 as the U.S. currency topped multi-month highs.
The yield benchmark 2030 government bond, which touched its weakest level in nearly four months earlier in the session at 9.235%, trimmed the losses to 9.020%.
The rand enjoyed a brief rally this week, reaching a 13-month best, after Wednesday’s budget speech showed a slightly faster economic rebound.
But the cheer soon faded as investors, who have been lured to local assets by the high yield on offer, began to price in an expected unwinding of fiscal and monetary stimulus in the Unite States and elsewhere among developed economies.
Government bonds in the United States, particularly U.S. Treasuries, have become a focal point for global markets after traders aggressively moved to price in earlier monetary tightening than signalled by the U.S. Federal Reserve and peers.
“The high real yields SA offers are hard to come by these days, meaning they will continue to attract hot money until interest rate differentials begin to narrow once more, but they do hold significant risk and will experience high degrees of volatility,” said economists at ETM Analytics.
Stocks came under pressure on Friday along with other emerging markets, with the MSCI’s Emerging Markets equity index suffering its biggest daily drop in nearly 10 months.
The Johannesburg All-share index, which had risen for the last two sessions, fell 1.91% to 66,194 points, while the Top-40 index ended 2% weaker at 60,820 points.
Platinum miners were among the fallers on the day with the sector down 3.73% on the back of a weaker price for platinum and palladium.
Precious metals producers Anglo American Platinum fell 2.33%, Impala Platinum weakened 2.59% and Sibanye Stillwater closed 6.23% lower. (Reporting by Mfuneko Toyana and Tanisha Heiberg Editing by Mark Heinrich)