Excerpt from Roeloff Horne’s latest article that looks at the South African markets… “The 1966 Western? No… More like our current economic climate! Who can remember Clint Eastwood’s role (‘Blondie’) in the movie The Good, the Bad and the Ugly? One of the famous quotes in the movie was that of Tuco: “If you save your breath, I feel a man like you can manage it. And if you don’t manage it, you’ll die. Only slowly, very slowly, old friend”
The months of May and June reminded me of this movie title. When good news became ‘bad’ news for emerging market currencies and bonds as improved US economic conditions – and rumours of potential monetary tightening by the Fed – caused the US 10 year Treasury yield to spike. Within the space of two weeks, a 60 basis point (bps) increase in US 10 year treasuries caused a 120 bps rise in Mexican yields and almost 200 bps in S.A.
Judging by these numbers it can be fair to say that SA specific factors have definitely played a (say 40%) role in the higher yield spike and weaker rand, but there has also been a general weakness in most emerging market currencies as a result of improved US economic prospects, a stronger US Dollar and a subsequent correction in US 10 year treasury yields.”
The Good, The Bad, The Ugly...
