London — An emerging-market (EM) sell-off was in danger of snowballing on Friday, as SA’s budget woes sent the rand to an 11-month low, Turkey’s lira dropped for a sixth day, and EM bond and stock markets racked up a second week of losses. Worries that SA could soon lose its remaining investment grade credit ratings knocked another 0.3% off the rand, taking its slump to more than 4.5% since the government ramped up deficit forecasts on Wednesday. This was set to be its second worst week of the year and the country’s bonds were also on the ropes as yields climbed to their highest in 18 months. The yield on the benchmark 2026 bond rose to 9.3% having started the month at 8.5%. "Our base case is that [SA] doesn’t get downgraded until next year. But we will be keeping a close eye on the politics," said Yacov Arnopolin, portfolio manager for EM portfolios at Pimco. "We are currently neutral local currency debt in SA, and that’s worked out nicely in the last couple of days." Turkey, anoth...
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