Investors punish SA for its budget with dismal bond auction | Fin24
 
  • Money Flows

    About 3 000 super-rich have left SA in the past 10 years, according to a new report.

  • Nelson Mandela

    Madiba would have been alarmed at the polarisation and hate speech in SA, says Derek Hanekom.

  • Fin24’s newsletter

    Sign up to receive Fin24's top news in your inbox every morning.

Loading...

Investors punish SA for its budget with dismal bond auction

Oct 30 2018 20:53
Colleen Goko, Bloomberg
Tito Mboweni, South African Minister of Finance wa

Tito Mboweni, South African Minister of Finance walks with members of the Finance Ministry up Government Avenue to deliver his medium-term budget speech on October 24, 2018. (RODGER BOSCH/AFP/Getty Images)

Related Articles

Cabinet welcomes medium term budget, promises debt reduction

SA mini budget is credit-negative, says Moody's

WATCH: Mini budget's 'same old same old' won't take us anywhere - BBC President

Fitch sees muted impact from SA measures to boost growth

Analysts on mini-budget: Watch those record fuel prices

Mboweni hints at risky changes in mini budget

 

So that’s what bond investors think of Finance Minister Tito Mboweni’s maiden budget.

In the first scheduled bond auction since Mboweni delivered his fiscal update to members of parliament on October 24, demand dropped 67% from the previous sale to the lowest since March, when the amount offered was reduced to R2.4bn a week, according to data compiled by Bloomberg.

Primary dealers that buy bonds directly from the government on Tuesday placed R4.17bn of orders, well below the R7.4bn average over the past eight months, National Treasury data shows.

Mboweni revised growth and tax revenue forecasts lower, while targeting a wider budget deficit and higher government debt over the next three years than previously predicted. The budget was credit-negative, according to Moody’s Investors Service, the only major rating company that still ranks South Africa’s debt at investment level.

The "uninspiring" auction showed investors are betting benchmark yields are still too tight, even after they climbed to the highest level this year, said Deon Kohlmeyer, a fixed-income trader at FirstRand [JSE: FSR] in Johannesburg. "The budget was not great for bonds."

Yields on benchmark 2026 government bonds rose five basis points to 9.29% by 15:00 in Johannesburg. South African government rand bonds have lost 11% for dollar investors this year amid a record sell-off by foreign investors.

bond

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

NEXT ON FIN24X

 
 
 
 

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Do you think government can solve the Eskom crisis?

Previous results · Suggest a vote

Loading...