South African bonds back in demand as high-yield lures foreign investors



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South African bonds back in demand as high-yield lures foreign investors

In the face of a near-zero returns in government debts across the globe, foreign investors were hurrying on to South Africa’s sovereign debts which had recently been downgraded in to a junk territory, while the high-yielding debts in the Africa’s most industrialized nation appeared to be grabbing investors’ attention amid a rise in appetite for riskier assets.

More interestingly, the foreign investors, who had been the net sellers of South Africa’s sovereign bonds this year, became the net buyers over the past two weeks and had purchased 4 billion South African rand worth of bonds.

On the funnier side, Goldman Sachs, one of many US lenders which had forecasted a pessimistic outlook on S. African credit on prior occasions given the scale of higher unemployment rate and Government mismanagement the world’s southernmost tip had been witnessing, said later this week that it would stick to a “buy” rating on South Africa’s 10-year Government debts.

South Africa had sold a record $4 billion worth of South African Rand-denominated bonds this year before getting downgraded by the “big three” credit rating agencies such as S&P, Fitch and Moody’s.

African long-term local debts

On top of that, as the eurozone economy had been dwindling with a majority of Government debts were allotted to an economic overhaul and questions emerged on how long the US Treasury would be able to send checks to its vastly unemployed workforces, demands of the South African local bonds appeared to be rising intransigently, as a Goldman Sachs analysts, Kamakshya Trivedi said in a client note, “We continue to favour longs in 10-year SAGBs on an FX-hedged basis given the attractive carry”.

Besides, in what could be seen as a far more encouraging sign for the ailing South African economy, Germany’s largest lender Deutsche Bank alongside the Bank of American had also recommended the S. African debt, while a Deutsche Bank analyst Christina Wietoska wrote in a client note that the German lender were recommending long-term bonds scheduled to be matured in 2035 and 2037 adding “After the underperformance and a decline of 16.2 percentage points in foreign holdings since YTD, R186 (2026 bond) is also becoming a more interesting bond once again.