London - Who’s the underdog now?
Thanks to a political roller-coaster that ended with Cyril Ramaphosa being named South Africa’s president on Thursday, the nation’s bonds are more expensive than those in Mexico for the first time on record.
“That is a first in emerging markets,” said Daniel Moreno, head of global emerging-market debt at Mirabaud Asset Management.
“South Africa has always been the underdog that you would definitely avoid and Mexico was a darling of emerging-market investors for more than two decades. And now the pre-conceived argumentation in these two countries has completely turned upside down.”
While the yield on South Africa’s 2023 rand-denominated bonds fell 17 basis points to a 2015 low, the rate on Mexico’s local-currency securities due 2022 has been rising amid concerns over trade with the US and election risks.
Meanwhile, the Mexican central bank has boosted borrowing costs to stem inflation and support the peso.
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