Rand strengthens to strongest level since February

Eskom’s biggest bondholder has a rescue plan for the state-owned company
Chief Investment Office12 Jul 2019
    Photo credit: AFP Photo


    The rand rose to the strongest level since February after Eskom Holdings SOC Ltd’s biggest bondholder was said to have a rescue plan for the state-owned company.

    The currency, which was already being buoyed by a global rally, added as much as 0.9%, bringing the dollar-rand pair close to crossing below its 200-week moving average. The nation’s 2026 bonds rallied, putting the yield on course to closing below 8% for the first time in more than a year.

    The Public Investment Corporation wants to convert its USD6.4b holding into equity in return for a say over Eskom’s management, including board representation, said five people with direct knowledge of the talks.

    A plan for the struggling utility would be a relief for government bonds and the rand, which have been weighed down by concerns over the impact of bailouts on the nation’s finances. The potential proposal coincides with a rally in Emerging Markets, which advanced on bets the US will cut borrowing costs this month for the first time in more than 10 years.

    The rand added 0.9% as of 2:29pm in Johannesburg to 13.8650 per dollar. The main stock gauge was little changed.

    Eskom, which supplies about 95% of the electricity used in Africa’s most industrialised economy and has been labelled “too big to fail” by President Cyril Ramaphosa, has more than ZAR440b (USD32b) of debt, and does not generate enough cash to service it. The National Treasury is finalising a bailout plan over and above the ZAR68b rand pledged in the February budget. – Bloomberg News.

    The US Dollar Index (DXY) fell 0.06% to 97.050, the pound rose 0.15% to USD1.2521, and the euro was little changed at USD1.1254. The yen weakened 0.04% to 108.50 per dollar.

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