South African bond selloff resumes as Turkey contagion stokes local risks

* Offshore investors drop $800 million of local debt

* Forward markets pricing in September rate hike

* Dollar liquidity squeeze, local factors weigh

By Mfuneko Toyana

JOHANNESBURG, Aug 24 (Reuters) – South African bonds suffered twice the outflows of the next worst-hit emerging market at the height of the Turkey crisis as foreign investors scrambled to reduce volatility in their portfolios against a backdrop of rising economic risk.

Even with forward markets now heavily pricing in interest rates hike this year, which would boost the potential yield on local bonds, investors are dumping Pretoria’s debt with increasing speed.

The Turkish lira has plunged nearly 40 percent this year over investor concern about Tayyip Erdogan’s influence on monetary policy and a deepening row with the United…

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