Investors snap up South Africa bonds after buy” recommendation on 10-year issue

Date:

JOHANNESBURG (Reuters) – After selling a record 69.6 billion rand ($4 billion) of South Africa’s recently downgraded bonds this year, foreign investors – faced with low to zero returns around the world – are rushing back to grab the high-yielding debt in the ailing economy.

Thank you for reading this post, don't forget to subscribe!

In the last two weeks foreign investors have been net buyers of local bonds to the tune of more than 4 billion rand, after weeks of being net sellers.

This week Goldman Sachs said it was sticking to a “buy” recommendation on South Africa’s 10-year issue.

“We continue to favour longs in 10-year SAGBs on an FX-hedged basis given the attractive carry,” the U.S. bank’s Kamakshya Trivedi said in a note.

Deutsche Bank and Bank of America also recommend the South African debt, with Deutsche Bank saying it preferred long-dated bonds due in 2035 and 2037.

“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,” said Deutsche’s emerging market strategist Christian Wietoska.

Outflows in a stampede out of emerging markets has pushed foreign holdings in South Africa’s bonds to an eight-year low, as the coronavirus pandemic and the rating downgrades that followed sucked-up liquidity and spooked investors.

Foreigners held 31.5% of South Africa’s bond in May, down from 37.3% in January, according to National Treasury data.

But in the last few weeks, with the global economic recovery increasingly on the cards and the local central bank buying government bonds to ease liquidity strains, foreign investors are doing what locals have done all along.

“Look at some of the most obvious mandates, inflation plus 2% to 4%. If you’re being offered a government bond of 11% to 12% and inflation is only 3% or 4%, that’s as close to a slam-dunk as you get,” said chief executive of Canon Assets Adrian Saville.

On Friday central bank data showed the regulator had bought 10.2 billion rand worth of government securities in May, compared to the 20.6 billion rand it purchased in April, making its bond-buying scheme among the more conservative policies in emerging markets.

($1 = 16.8252 rand)

Reporting by Mfuneko Toyana, editing by Olivia Kumwenda-Mtambo and Angus MacSwan

Naija247news
Naija247newshttps://www.naija247news.com/
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

Share post:

Subscribe

Popular

More like this
Related

Access Holdings to pay N1.80 as final dividend to shareholder

March 28, 2024. Azonuchechi Chukwu. Access Holdings has revealed plans to...

Police gun down two notorious bandits in Benue

March 28, 2024. Azonuchechi Chukwu. Men of Operation Zenda, a Joint...

Army declares eight wanted in connection with the k!lling of its officers in Okuama

March 28, 2024. Azonuchechi Chukwu. The Nigerian Army has declared eight...

Naira Appreciates Against Dollar at the NAFEM Window

March 28, 2024. Azonuchechi Chukwu. The Naira’s euphoric appreciation against the...
Social Media Auto Publish Powered By : XYZScripts.com

Discover more from Naija247news

Subscribe now to keep reading and get access to the full archive.

Continue reading