South Africa: Why the South African Eurobond Issue Should Inspire Confidence

analysis

In polar opposition to the latest RMB/BER Business Confidence Index, which has reached a two-decade low, international investors have seemingly taken a very different view on SA's future economic outlook. Perhaps, on the home front, we are somewhat in need of a more sober global perspective, and a little more self-confidence.

On Monday 23 September 2019, South Africa went into the Eurobond market for the first time since May 2018. Initially expecting to raise $4-billion to fund foreign currency commitments, as detailed in the 2019 National Budget in February, the offering by the government was met with significant demand from foreign investors and was ultimately 2.7 times oversubscribed.

With investor interest from a range of large financial institutions across Europe, North America, Asia, Africa and the Middle East, price talks prior to the sale initially suggested that the 10-year bond would be priced at 5.25%, while the 30-year bond was expected to be priced at 6.125%. This was in line with South Africa's previous Eurobond sale in 2018, which priced 12-year bonds at 5.875% and 30-year bonds at 6.3%.

The day after the issuance, Treasury announced that the 10-year bond had been priced at 4.85% and the longer-dated 30-year bond...

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