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Johannesburg - The growth of the South African municipal bond market is likely to be maintained in the medium term, said Moody's Investors Service on Monday.
The ratings agency said in a report that cumulative bond issuances of R12.3bn were already recorded as of the first quarter of 2011.
"The market has expanded fivefold since the inaugural COJ01 bond issued by Johannesburg in 2004, and largely reflects the need for magnet cities to finance large-scale infrastructure projects," it said.
Moody's said interest from domestic investors in the relatively new class of debt supported its view of a continued expansion of the municipal bond market in SA in the medium term.
"Among the factors driving investor interest in bonds issued by large municipalities are strong investment-grade ratings on the South African national scale, their large and diversified budgets and their above-average management expertise," said Francesco Soldi, a Moody's vice-president and co-author of the report.
However, Moody's noted that notwithstanding these good growth prospects, traditional bank lending would remain a major source of debt funding for municipalities.
It said it believed that issuance in the municipal bond market would continue to be dominated by the country's three largest cities: Johannesburg, Cape Town and Ekurhuleni.
"However, South Africa's other large municipalities may tap the capital markets in the future given their capital needs and relative size of potential debt issuances," Moody's concluded.
The ratings agency said in a report that cumulative bond issuances of R12.3bn were already recorded as of the first quarter of 2011.
"The market has expanded fivefold since the inaugural COJ01 bond issued by Johannesburg in 2004, and largely reflects the need for magnet cities to finance large-scale infrastructure projects," it said.
Moody's said interest from domestic investors in the relatively new class of debt supported its view of a continued expansion of the municipal bond market in SA in the medium term.
"Among the factors driving investor interest in bonds issued by large municipalities are strong investment-grade ratings on the South African national scale, their large and diversified budgets and their above-average management expertise," said Francesco Soldi, a Moody's vice-president and co-author of the report.
However, Moody's noted that notwithstanding these good growth prospects, traditional bank lending would remain a major source of debt funding for municipalities.
It said it believed that issuance in the municipal bond market would continue to be dominated by the country's three largest cities: Johannesburg, Cape Town and Ekurhuleni.
"However, South Africa's other large municipalities may tap the capital markets in the future given their capital needs and relative size of potential debt issuances," Moody's concluded.
