Finance Minister Tito Mboweni's Medium Term Budget Policy Statement (MTBPS) has failed its first crucial test. Bond yields spiked as he grimly outlined a worsening debt outlook.
As Finance Minister Tito Mboweni began addressing Parliament, the yield on the benchmark 10-year bond was fetching 9.285%, up about six basis points on the day, according to Investing.com data. It then spiked to 9.415% as he spoke, before settling back to 9.28% as his 50-minute speech wound down. The Rand also lost ground against the dollar, stumbling from 16.38/dlr to 16.4775 - a one-week low.
"For markets, the key takeaway is that, all things considered, South Africa's growing public debt is still a problem," said Razia Khan, chief Africa economist at Standard Chartered Bank.
The JSE Top-40 index extended losses on the day to be 2.6% lower, but that was probably as much a function as a downturn in global stock markets rattled by surges in Covid-19 cases in key markets such as the US.
Mboweni warned of a worsening sovereign debt outlook, which means the government will have to borrow more over the next few years, straining the state's ability to repay lenders what it owes. As a result, investors will...