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Rand gains as Moody's delays SA's credit rating

Apr 04 2017 17:45

Cape Town – Moody's Investor Services confirmed to Fin24 that it decided to defer its decision on South Africa's sovereign credit rating, giving the rand a slight reprieve.

Moody’s, which currently has South Africa's sovereign at two notches above non-investment grade at Baa2, placed South Africa on downgrade review on Monday evening.

Moody’s initially planned to review South Africa's credit rating, with an announcement expected this coming Friday.

"To be clear, Moody’s announced a rating action for the Government of South Africa on Monday evening. The potential calendar date on Friday, April 7, will now not go ahead," a Moody's representative told Fin24.

INFOGRAPHIC: How junk status will affect you

A further announcement will follow the conclusion of the review, which typically takes between 30 and 90 days.

The ratings agency said in a statement that it had placed SA on a review for a downgrade after a Cabinet reshuffle that removed respected finance minister Pravin Gordhan from his post.

The announcement followed soon after S&P Global Ratings downgraded South Africa's sovereign credit rating to BB+, which is sub-investment grade or more commonly known as junk status.

READ: Rand keeps falling as Moody's places SA on downgrade review

Meanwhile, TreasuryOne noted that although the market is still riding the downgrade wave from S&P overnight, the market calmed after Moody's announced a ratings delay.

"This calmed the market and after that the bond auction was 6 times oversubscribed. This means that foreign investors see a lot of value in the 9.00% + yield being offered by the 10Y bonds. Yields have eased of to currently trade at 8.88%."

The rand saw a recovery to its current level of R13.52 to the US dollar. This is the same level seen before the downgrade by S&P was announced, said TreasuryOne.

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