By Rivaldo Jantjies.
South Africa anticipates strong demand for a planned Eurobond sale, citing an improved economic outlook as it considers raising $2.7 billion in global markets to meet foreign-currency commitments for the fiscal year, National Treasury Director-General Duncan Pieterse said.
The Treasury is seeing strong demand “on the local currency side, and we expect that to carry through on external debt should we go forward with the Eurobond soon, “Pieterse said in an interview with Bloomberg in Johannesburg on Friday.
Of the $5.3 billion in planned foreign financing, “we’ve raised about $2.6 billion” and the balance will likely come from a Eurobond, bilateral funding, or a combination of both, he said, without confirming the timing of the issuance.
Renewed confidence in SA’s fiscal and monetary management has bolstered market sentiment.
In its latest budget update, the Treasury reported revenue surpassing projections, reaffirmed its commitment to fiscal consolidation and embraced a more ambitious 3% inflation target.
The upbeat outlook was cemented by S&P Global Ratings’ first credit upgrade for the country in nearly two decades earlier this month, helping to drive borrowing costs lower.
South African dollar-denominated bonds have returned 15% this year, compared with 10% for a Bloomberg index tracking emerging-market dollar debt.
The extra yield investors demand to hold South African dollar securities rather than US Treasuries, known as the sovereign spread, has narrowed to 222 basis points from a high of 396 in April.
The average for developing-nation high-yield bonds is 476.