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Foreigners boost SA bond sales

Johannesburg - Foreigners were the net buyers of R2.42bn worth of South African bonds in 2009, including repurchase agreements.

In 2008 foreigners were net sellers of R40.72bn worth of South African bonds (also including repurchase transactions).

"Bond yields picked up through much of 2009," said sub-Saharan Africa specialist at Citigroup Leon Myburgh. "Foreigners' buying spree increased, especially in the second half of the year."

Sulette Wentzel, fixed income dealer at Cadiz Securities, said foreigners viewed SA bonds as a safe investment with "guaranteed returns" in the context of recessionary conditions.

Excluding repurchasing agreements, foreigners were net buyers of R708.646m worth of South African bonds, after net sales of R53.83m worth of local bonds the week before.

This brought net purchases, excluding repurchase agreements, for 2009 to R27.34bn.

Myburgh said up until 2004 and 2005 South Africa struggled to attract foreign bond buyers as it had to compete with higher prevailing interest rates in other markets.

"Investing in SA bonds was less attractive for foreigners when there were relatively higher interest rates elsewhere," said Myburgh.

Foreigners were net buyers of local bonds to the tune of a revised R6.59bn in 2007, including repurchase agreements, after net purchases of R31.99bn in 2006 and net sales of R7.10bn worth of local bonds in 2005.

Myburgh said he expects 2010 to be characterised by high debt issuance on a global scale. He said this is because governments around the world are running large fiscal deficits.

"Due to subdued inflation there will be net buying of SA bonds throughout 2010, although more moderate than in 2009," Myburgh said.

- Fin24.com

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