Investor demand for South Africa’s government bonds surged as political parties formed a coalition, reaffirming Cyril Ramaphosa as president. Primary dealers sought 19.16 billion rand, over five times the 3.75 billion offered, signalling improved sentiment. Bond yields dropped sharply amid reduced political risk and potential US interest rate cuts, boosting market appeal.
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
By Mpho Hlakudi and Colleen Goko*
Investor demand at South Africa’s weekly government bond sale rose, signaling improved sentiment after political parties in the country agreed to form a governing alliance and re-elected Cyril Ramaphosa as president.
Primary dealers placed orders for 19.16 billion rand ($1.1 billion) of debt, more than five times the 3.75 billion rand of securities on sale Tuesday. This compares with a ratio of 3.9 at the previous auction, according to central bank data compiled by Bloomberg.
Read more: South Africa braces for cabinet battle in new coalition government
The African National Congress has agreed to form a government of national unity with parties including the centrist Democratic Alliance after losing its parliamentary majority in last month’s election. Ramaphosa is due to be sworn in Wednesday, with investor focus turning to who he will appoint to his cabinet.
“Politically, we see the positive progress on forming a coalition agreement as a favorable market outcome, making local bonds more attractive,” said Hannah de Nobrega, an analyst at Prescient Investment Management.
The reduction of political risk in South Africa, coupled with prospects of interest-rate cuts in the US as inflation moderates there, should support demand for the debt, she said.
Yields on South Africa’s rand notes maturing in 2035 fell 31 basis points by 3:40 p.m. in Johannesburg to 11.41%. That’s the most in a day since March 2022, taking total declines in June to 84 basis points.
South Africa’s local-currency bonds have been the best performing in emerging markets this month, handing investors a return of 6.4% in dollar terms. That compares with the 0.02% average loss for peers in a Bloomberg EM Local Government Bond Index.
Read also:
SA: Peace or Revolution?
South Africa’s new GNU now has five members, ANC says
🔒 Hartford: Election’24 was SA democracy’s ‘second miracle’, but challenges loom
© 2024 Bloomberg L.P.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa’s rise to presidential power, narrated by our very own Alec Hogg.
Get the Audiobook
Narration by Alec Hogg
>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : BizNews – https://www.biznews.com/sa-investing/2024/06/19/south-african-bonds-surge
