South African Rand and Bonds Roiled By New Covid Variant Omicron

The new Covid-19 Variant WHO has named Omicron wrecked world markets Friday with South African markets understandably the epicenter. Early PCR test results showed that 90% of 1,100 new cases reported Wednesday in the South African province that includes Johannesburg were caused by the new variant. Many countries have closed their borders to South Africa as a result.

South Africa Government Bond 10Y

Financial Markets Rocked by Omicron

  • The South African rand this week sank 3.4%, increasing 2021 losses to 9.8%.
  • South African 10-year yields jumped 19 bps Friday (high since April 2020), boosting the week’s yield spike to 43 bps.
  • South African CDS Friday surged 25 (43 for the week) to 252 bps – the high since March.

The new variant which contains significantly more mutations than others. “The 50 mutations on the new B.1.1.529 variant… include more than 30 on the spike protein, the exposed part of the virus that binds with human cells. These changes could make it more transmissible than the dominant Delta variant and more likely to evade the immune protection conferred by vaccines or prior infection.” It has raised concerns of further lockdowns and travel restrictions that could weigh heavily on a fragile South African economic recovery.

Read: Omicron’s Unusual Genetic Profile and Speed of Spread Concern Scientists

Bond yields were down across the board in safe haven nations. Falling over 10bps to a 3-week low of 1.49% in the US; the Germany Bund yield dropped to a near 10-week low of -0.32%; and the British one tumbled towards 0.8%, hitting its lowest level since November 9th.

On the other hand, the South African bond yield jumped almost 20 basis points to 9.9%, the highest since April 2020.

Source: TradersCommunity, Bloomberg

From The TradersCommunity News Desk