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South Africa markets eurobonds after coalition lifts confidence

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South Africa markets eurobonds after coalition lifts confidence

South African currency
Photo by Reuters

12th November 2024

By: Bloomberg

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South Africa is marketing eurobonds in its first potential international debt sale under a government of national unity following May elections.

The dollar offering is set to include a benchmark-sized 12-year fixed note with a yield in the 7.4% area, as well as a 30-year bond in the 8.25% area, according to a person familiar with the matter, who asked not to be identified.

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The move comes amid uncertainty for global monetary policy, with Donald Trump’s US election victory casting a shadow over what would otherwise be a positive reform story unfolding in South Africa. His policies may keep funding costs elevated, complicating the environment for nations like South Africa.

“There is probably a window of opportunity to issue” given the significant outperformance of South Africa’s bonds after the formation of the national unity government and emerging-market eurobond spread compression, said Samir Gadio, head of Africa strategy at Standard Chartered Bank. “EM credit markets have been resilient so far after the Trump election win,” he said.

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South Africa’s dollar-denominated bonds were the worst performers in a Bloomberg Sovereign hard-currency index tracking emerging and frontier markets on Tuesday. Yields on the nation’s eurobond due in April 2052 jumped by 12 basis points to 7.83%. That’s still below levels as high as 9% before the elections.

“We are very happy to see South Africa back after 30 months,” said Søren Mørch, head of emerging-market debt at Danske Bank. “We are a bit positive on the reform agenda after the election, and we think the government deserves the benefit of the doubt.”

“Timing is decent — the spread has narrowed significantly,” Mørch said. The South African Treasury remains a part of the country’s strong institutions, he added.

Citigroup Inc. and Goldman Sachs Group Inc. are acting as bookrunners for the sale, which is expected to price later on Tuesday.

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