South Africa: Treasury Pulls Rabbit Out of Hat With U.S.$5 Billion Sale of Two International Bonds

South Africa’s Treasury has issued a pair of international bonds to the tune of $5-billion, the largest such transaction out of sub-Saharan Africa. It’s a vote of investor confidence that Finance Minister Tito Mboweni can do with ahead of his medium-term budget speech in October and a looming Moody’s downgrade.

The Treasury said on Tuesday 24 September it had raised $5-billion, a billion more than initially offered, from the sale of a pair of international bonds – one for 10 years, the other for 30 years. The transaction was 2.7 times oversubscribed, meaning almost $11-billion in bids were made, underscoring surprisingly robust investor appetite for South African debt. The Treasury statement added that the issuance was “believed to be the largest ever out of sub-Saharan Africa”.

Even by wider emerging market standards, the transaction is hefty and suggests institutional investors are keen on yields in an age when a fair amount of debt coming out of developing economies has negative yields, meaning you will get less money than what you put in when it matures.

Of course, South African debt comes with a risk premium, but amid all the doom and gloom about rising debt levels, a barely growing economy…

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Author: skvaller

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