Share

Foreigners dumping R2bn a day in SA bonds as junk status looms

Investors have been dumping South African government bonds at a rate of almost R2bn a day in August.

With issuance increasing and a downgrade to junk a looming possibility, non residents have sold a net R14.4bn of the debt in August so far, according to JSE Ltd. data compiled by Bloomberg. That’s an average of R1.8bn a day. The sales have wiped out inflows at a time when the country needs foreign investment to close a current-account deficit that was equivalent to 2.9% of gross domestic product in the first quarter.

The government increased the amount of local-currency debt sold at weekly auctions by 37% last week to help pay for a R128bn bailout for Eskom Holdings, the state-owned electricity company. That will push up borrowing and widen the budget deficit, placing the country’s last-remaining investment-grade rating at risk. Moody’s Investors Service, which rates South Africa’s debt at Baa3, is reviewing its assessment in November.

Foreign ownership of South African government debt fell to 37.9% at the end of July, the lowest level this year, from as high as 42.8% in March 2018, according to National Treasury data. Foreigners are exiting despite yields that are among the highest in emerging markets, suggesting they’re worried a downgrade to junk would see the nation’s bonds kicked out of indexes that track investment-grade debt, such as Citigroup Inc.’s World Government Bond Index.

Though foreign ownership is already the lowest this year, the selloff has continued unabated. Inflows have turned into net outflows of 3.2 billion rand for the year in August - even at a time when a world awash with negative yields is fueling demand for riskier assets such as emerging-market debt.

In dollar terms, South African local-currency bonds have under-performed all major emerging markets in August except Argentina’s. Yields on benchmark government securities have risen 111 basis points this month, while the rand has depreciated 5.5% against the dollar, further eroding returns for foreign investors.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.05
-0.7%
Rand - Pound
23.98
-0.3%
Rand - Euro
20.55
-0.4%
Rand - Aus dollar
12.36
-0.1%
Rand - Yen
0.13
-0.7%
Platinum
894.10
-0.3%
Palladium
996.00
-0.6%
Gold
2,193.32
-0.1%
Silver
24.41
-1.0%
Brent Crude
86.09
-0.2%
Top 40
67,889
+0.3%
All Share
74,074
+0.2%
Resource 10
56,132
+0.9%
Industrial 25
103,554
+0.3%
Financial 15
16,492
-0.2%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders