- Mar 6, 2004
Source: https://www.fin24.com/Economy/foreigners-are-dumping-billions-in-sa-bonds-as-junk-status-looms-20190814Investors 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.