Johannesburg - South Africa will join
Citi's influential World Government Bond Index (WGBI) from
October, the US bank said on Monday, conferring an important
seal of approval on the continent's biggest economy after recent
credit outlook downgrades.
Citi said 11 of South Africa's government bonds worth $83bn had met the WGBI's entry requirements for three straight
months, allowing it to accede to the index later this year.
When South Africa's possible inclusion was first announced
in April, bonds rallied sharply due to expectations of a flood
of cash from index-tracking funds that would need to load up on
At the time, estimations of the inflows ranged from $5bn to $9bn. Confirmation of South Africa's accession
had been widely expected.
"There are 11 South African government bonds eligible for
the WGBI. The market value of these bonds is $83bn,
which represents a pro forma market weight of 0.41% in
the WGBI," Citi said in a statement.
The WGBI currently has 22 countries, with Malaysia, Poland
and Mexico the only emerging markets to be included. South
Africa will be the first African sovereign represented.
Pretoria applauded Citi's announcement in April as an
endorsement of its long-term spending plans in the face of
concerns from rating agencies about its ability to keep its
budget deficit in check.
The government is forecasting a deficit of 4.6% for
this year, but says it should be able to bring that down to
close to 3% by 2014 as economic growth continues to pick
up from a 2009 recession.