The South African rand dropped sharply against the USD and bonds depreciated as Moody’s Investor Services announced its intention to reduce its outlook on the country’s sovereign debt rating. The rating agency cited growth and deficit concerns as reasons for the decision. Moody’s reduced the outlook from ‘stable’; South African debt is rated as BBB+ by Standard & Poor’s, one level below that of Moody’s. The rand, which had appreciated substantially in recent weeks, immediately dropped 1.5 percent in value and is currently trading at around 8.00 to the USD. This was the biggest drop in a single day since the beginning of November. The yield on 13.5 percent government bonds, which are due in 2015, also increased 11 basis points and now stands at 6.5 percent. The yield on the $2bn worth of South African government bonds due in 2020 also increased by 1.86 percent (23 basis points). Higher interest rates on government bonds reflect the increased risk investors associate with them. Moody’s decision to reduce its outlook on South Africa’s A3 rating on local currency and long-term currency debt is the result of fears that the country’s annual growth rate will be lower than initially estimated and that the country’s government will be unable to meet its commitment to cutting budget deficits, as a result of popular pressure. On October 25, Pravin Gordhan, who is South Africa’s finance minister, announced that the budget deficit for the year ending March 31 would, in all likelihood, be 5.5 percent of […]

The South African rand dropped sharply against the USD and bonds depreciated as Moody’s Investor Services announced its intention to reduce its outlook on the country’s sovereign debt rating. The rating agency cited growth and deficit concerns as reasons for the decision. Moody’s reduced the outlook from ‘stable’; South African debt is rated as BBB+ by Standard & Poor’s, one level below that of Moody’s. The rand, which had appreciated substantially in recent weeks, immediately dropped 1.5 percent in value and is currently trading at around 8.00 to the USD. This was the biggest drop in a single day since the beginning of November. The yield on 13.5 percent government bonds, which are due in 2015, also increased 11 basis points and now stands at 6.5 percent. The yield on the $2bn worth of South African government bonds due in 2020 also increased by 1.86 percent (23 basis points). Higher interest rates on government bonds reflect the increased risk investors associate with them. Moody’s decision to reduce its outlook on South Africa’s A3 rating on local currency and long-term currency debt is the result of fears that the country’s annual growth rate will be lower than initially estimated and that the country’s government will be unable to meet its commitment to cutting budget deficits, as a result of popular pressure. On October 25, Pravin Gordhan, who is South Africa’s finance minister, announced that the budget deficit for the year ending March 31 would, in all likelihood, be 5.5 percent of […]

Stocks in early trading in Asia slumped on Wednesday after a downward revision of US economic growth in the third quarter and rising yields on Spanish bonds. The US economy grew at a two percent annual rate, 0.5 percent less than its initial estimate, the Commerce Department said. Meanwhile, higher borrowing costs in Spain triggered renewed worries about the eurozone’s continuing debt crisis. Despite a new Spanish government coming to power this week, investors still remain doubtful about whether the country will be able to get its budget in order. Investors particularly fear that Spain could become the next eurozone country to require financial support from its neighbours. Spain’s 10-year bond stands at 6.58 percent just 0.42 percent shy of the 7 percent that forced Greece to ask for relief from its lenders.

For several months, measures to reduce aid to the Palestinian Authority have been on the minds of many lawmakers in the United States. In August, the measures were actually implemented, effectively cutting off roughly $200m in aid to the PA. In addition, measures were also put in place to freeze the distribution of a further $200m. While the attempt had been dismissed as political posturing on the part of a number of lawmakers under the guise of balancing the US budget, there was a general feeling that enough opposition to any cuts existed in Congress and the measure would be defeated; unfortunately, that was not the case. Prior to the freeze, Palestinian Monetary Authority Governor Jihad al-Wazir commented on what the action would mean for the financial stability of the PA. “It would have a major impact on the economic situation in the West Bank, if the you lose $500m [in US aid] from financial support for development in the West Bank… really, the risk of a PA collapse is very real under the financial strain, without US assistance, without donor assistance in general.” There has been speculation that the underlying reason for the measure was the intention of PA president Mahmoud Abbas to ask the United Nations to recognise Palestine as a state, sometime in September. The cut off of the funds came before the end of the governmental fiscal year, which was on 30th September and would also affect the potential for any funds to be disbursed during […]

While there has been a degree of strain in relations between Syria and Turkey for decades, recent events have created additional stress on an already tenuous relationship. Thanks to Turkish support of a change in the current regime leading Syria, a great deal of unrest has been added to the situation. While, at one point, there was talk of reworking some of the border restrictions between the two nations, that has fallen out of favour as some Syrians see Turkey’s move as being not just opposition to actions taken by the Syrian government over the last year, but actually the beginning of a plot to overthrow the country’s government and even the possibility of military intervention.   Syria has taken issue with Turkey’s status as a safe haven for Syrian insurgents. Those in Turkey who support the sanctions see them as necessary to send a clear message that Turkey does agree with what is happening in Syria and think changes should be made. For those in Syria who support the current regime, this is seen as interference by Turkey in the country’s internal politics. Turkish officials have been pushing for sanctions against Syria for some time, beginning in March this year. When the United Nations balked at the idea of sanctions in early October, Turkish Prime Minister, Recep Tayyip Erdogan, made it quite clear that whatever the UN decided to do, Turkey would move forward. “Naturally the veto … cannot prevent sanctions,” Erdogan commented, adding, “We will of necessity implement […]