South Africa’s rand swung to gains and benchmark government bonds narrowed declines after Eskom reported a full-year loss of R20.7 billion ($1.5 billion).
The rand advanced 0.1% to 14.15 per dollar, after being as much as 0.5% weaker earlier, while yields on 2026 government notes traded at 8.32%. Yields on Eskom’s dollar bonds due February 2025 fell three basis points to 6.26%.
The power company supplies about 95% of South Africa’s electricity and relies on government handouts to remain solvent. The utility’s precarious financial state has now become a national problem, with the government pledging a R128 billion bailout over the next three fiscal years to keep it operating.
Additional support for Eskom would likely come at the price of the country’s last remaining investment-grade rating with Moody’s Investors Service as it would widen the fiscal deficit and increase the debt burden.
© 2019 Bloomberg L.P.