South African rand, bonds tumble on panel findings against president

The South African rand and government bond prices fell sharply on Thursday as investors digested news that President Cyril Ramaphosa may be impeached following a panel of experts' findings against him.

The rand USDZAR, USDZAR weakened by 2% to close at 17.55 against the dollar in New York, posting its largest percentage decline since June 10. It fell as far as 17.965 per greenback during the session.

The yield on South Africa's benchmark 10-year local bond closed up 65 basis points at 10.935% (ZAR2030=) after spiking to 11.185% in the biggest daily move since the March 2020 COVID-19 induced market rout.

South Africa's presidency hangs in the balance, a day after a panel report found preliminary evidence that he may have violated his oath of office and committed misconduct.

The president has denied any wrongdoing. Ramaphosa has not been charged with any crimes.

"The uncertainty around Ramaphosa's presidency has caused a selloff of the local currency as investors now wait for clarity on the ramifications of the report, and what that could mean for the president," said Bianca Botes, director at Citadel Global.

The growing uncertainty around his political future will weigh negatively on sentiment, said Barclays in a note, adding that it could slow the "positive momentum" that South African credit spreads have enjoyed.

South Africa's sovereign dollar-denominated bonds dropped across the curve with longer-dated maturities suffering the biggest losses. The 2052 issue slipped 2.347 cents to trade at 85.867 cents in the dollar, Tradeweb data showed. (US836205BE37=TE)

South Africa's five-year credit default swap, which insures against a sovereign default, rose 22 basis points on the day to 266 basis points according to S&P Global Market Intelligence.

While the Johannesburg Stock Exchange closed higher, with the all-share index JSE:J203 up 0.26% to 75,020 points, the banks, whose performance largely depend on the local economy, tumbled. The stock market banking index JSE:J835 closed down 8.18% at 9635.29 points.

In London, shares in financial companies Investec INVP, Old Mutual OMU, Ninety One N91, and miner Anglo American AAL fell 9%, 12%, 5% and 3% respectively, as the falling rand hit shares of South Africa-exposed companies.

Some currency traders noted that the rand was not yet at annual or historically weak levels against the U.S. dollar. Thursday's close was the weakest in less than a month.