Africa-Press – South-Africa. Investor demand at South Africa’s weekly government bond sale more than doubled as risk appetite improved globally after the US and China reached a deal to temporarily lower tariffs.
Primary dealers placed orders for R14.86 billion of debt, almost four times the R3.75 billion of securities on sale Tuesday, according to central bank data compiled by Bloomberg.
“This could reflect better global risk conditions given the de-escalation of trade tensions between the US and China,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank.
“Risky assets have seen support this week as market confidence improved. This is despite a rebound in the dollar and a bounce in Treasury yields.”
Investors are also looking to Finance Minister Enoch Godongwana’s budget presentation next week, Gadio said. Godongwana will present his revised 2025 fiscal plan next Wednesday, following two rejections by members of the coalition government that opposed an increase value-added tax.
“There is still some market uncertainty about how the scrapping of the VAT hike will be offset in the upcoming budget, but this is likely mostly priced in given the steepness of the curve,” Gadio said.
Investors showed most appetite for 2040 securities, with R5.7 billion of orders for R1.25 billion of bonds while 2035 notes attracted orders of R4.48 billion and 2032 bonds received R4.88 billion of bids.
“South Africa’s sovereign risk is seen improving if you look at falling CDS pricing,” said Michael Grobler, a fixed-income strategist at Ashburton Fund Managers.
The price of insuring South Africa’s debt against default using five-year credit-default swaps has dropped 16 basis points this week to 212, the lowest since March 25, before President Donald Trump announced sweeping new tariffs.
Yields on the 2035 bonds fell as much as four basis points on Tuesday. They erased the drop to trade two basis points higher at 10.53% by 4:20 p.m. in Johannesburg, after South Africa’s state-owned power utility said it’s planning rolling blackouts through Thursday evening to manage limited generation capacity.
The rand weakened as much as 1.1% against the dollar.
Bonds could extend gains if the budget next week pledges spending cuts rather than additional borrowing to plug the financing gap left by the scrapping of the VAT increase, Grobler said.
“We believe investors are now fairly compensated to take some duration risk in South African government bonds,” he said.
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