Government bonds weaken on Treasury row, rand steady

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February 29, 2016 8:55 PM

Finance Minister Pravin Gordhan said on Friday there were attempts to discredit him and the integrity of the Treasury after receiving a letter from the elite Hawks police unit questioning his knowledge of a suspected rogue unit at the revenue service.

South African rand notes in a file photo. REUTERS/Siphiwe Sibeko

South Africa's government bonds weakened on Monday, with the yield on the benchmark instrument soaring as much as 28 basis points as a row between the finance minister and the head of the revenue authority hurt sentiment.

Finance Minister Pravin Gordhan said on Friday there were attempts to discredit him and the integrity of the Treasury 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 state revenue agency, which reportedly led Gordhan to threaten to quit from the cabinet at the weekend.

"Headlines about feud between top men at National Treasury and SARS (South African Revenue Service) are not helping sentiment toward South African assets, even though most saw budget presented last week as austere and credible, albeit light on growth-promoting reforms," NKC African Economics said in a note.

As of 0713 GMT, the yield for the benchmark instrument due in 2026 had risen 23 basis points to 9.595 percent.

The rand traded at 16.1100 versus the dollar, slightly firmer from Friday's New York close of 16.1600, when the unit fell falling nearly 4 percent, its biggest daily loss since 2011.

"Talk is that one of the parties will have to go — the market fears it will be Gordhan. Who knows how long we will have to wait to get clarity," Rand Merchant Bank currency analyst John Cairns said.

On the stock market, the Top-40 index was down 0.95 percent while the broader All-share fell 0.9 percent in early trade.

Barclays Africa Group Ltd fell as much 6 percent when the market opened, and traded 4.96 percent lower at 137.65 by 0713 GMT after Barclays Plc said on Sunday its board was evaluating strategic options in relation to its shareholding in its African business.

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