Junk ratings across Africa, yet bond yields don't show it | Fin24
  • Mpumalanga Mine

    Constitutional Court rejects coal mining company’s attempt to appeal – but the saga isn’t over.

  • Audit Outcomes

    Turnaround plans had virtually no impact for ailing parastatals, the Auditor-General has found.

  • Battery Power

    Gordhan: Government intends to sign off soon on a "world class" battery storage project.


Junk ratings across Africa, yet bond yields don't show it

Aug 24 2017 11:32
Paul Wallace and Adelaide Changole, Bloomberg
iStock_africa markets

Company Data


Last traded 66
Change -1
% Change -1
Cumulative volume 3206989
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA


Last traded 175
Change -1
% Change 0
Cumulative volume 1036294
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

Related Articles

More than 50% of SA’s population is living in poverty

South Africa: One of the best opportunities globally

Recession, junk rating dampen trade conditions

Downgrade fallout could still get worse, economist warns

We’re junk. What now?

Deep discount lures buyers to SA banks despite junk


Lagos - Every African nation that’s sold dollar debt now has at least one junk rating, but it would be hard to tell by looking at the bond market.

The average yield on sovereign Eurobonds in Africa has hovered near the lowest level in two years this month, according to a Standard Bank [JSE:SBK] index, even after Moody’s Investors Service cut Namibia to below investment grade on August 11. The world’s biggest producer of marine diamonds had been the continent’s only dollar-bond issuer without a junk rating.

A low interest rate environment in the developed world has encouraged investors to look past the problems plaguing African economies, including low commodity prices, dollar shortages in some of them and rising political tension in others.

“The dynamics around African Eurobonds are mostly driven by external rather than domestic factors,” said  Ronak Gopaldas, a Johannesburg-based Africa strategist at FirstRand’s [JSE:FSR] Rand Merchant Bank. “Since late 2014, the continent’s economic fortunes have declined due to the combination of bad luck and own goals.”

Yields fall

Most of the developing world was hit with credit-rating downgrades after the 2014 crash in prices for raw materials, but Africa’s problems have lingered longer.

Even as commodity-rich nations such as Brazil and Russia see growth return, the continent’s two biggest economies - Nigeria and South Africa - are shrinking due to scarcity of foreign-exchange in the former and political uncertainty in the latter, while Mozambique and the Republic of Congo missed coupon payments this year.

But as poorly as many African economies are performing, they’re nowhere near as bad as they were in the 1980s, when oil plunged to about $10 a barrel, according to Renaissance Capital’s chief economist, Charles Robertson.


The region “is doing so much better” compared to then, said Robertson, who’s based in London. “Despite more countries borrowing from the private sector, there has not been a wave of defaults like we saw among emerging-market countries back in the 1980s.”

The continent’s Eurobonds have outperformed emerging markets, returning investors about 9% in 2017 compared with 7.7% for developing nations as a whole.

The average yield for dollar-securities sold by sovereign issuers from the continent fell to 6.14% on August 3, the lowest level since 2015, according to Standard Bank’s index. It has since risen two basis points to 6.16% as of Wednesday. The spread over US Treasuries, at 419 basis points, was also near the lowest in two years.

“All rallies usually come to an end, but predicting the peak is hard,” said David Cowan, an Africa economist at New York-based Citigroup.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter:

africa  |  ratings downgrade  |  markets  |  junk status  |  bonds  |  equities


Company Snapshot

Money Clinic

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

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote