South Africa Raises $3.5B in First Dollar Bond Sale Since 2022

AFRICAN STOCKS AND FINANCENovember 13, 2024 at 10:09 PM UTC

TLDR

South Africa returns to international debt markets, raising $3.5 billion through new dollar bonds with yields of 7.1% and 7.95%.
Investors show strong interest in the 12- and 30-year bonds, exceeding total demand to over $10 billion, viewing the new coalition government positively for reforms and growth.
Issuance occurs amidst challenging emerging markets environment; Citigroup and Goldman Sachs served as bookrunners for the sale.

South Africa returned to international debt markets for the first time since 2022, raising $3.5 billion through two new dollar bonds. The 12- and 30-year bonds were priced with yields of 7.1% and 7.95%, respectively, drawing strong interest with total demand exceeding $10 billion.

Investors view the new coalition government, formed after May’s election, as a positive sign for reforms and growth. The alliance, including the African National Congress, the Democratic Alliance, and other smaller parties, has pledged to address unemployment and boost the economy.

The issuance comes during a challenging environment for emerging markets as rising U.S. Treasury yields suggest higher funding costs. “Timing is decent—spread has narrowed significantly,” said Søren Mørch, head of emerging-market debt at Danske Bank, who expressed cautious optimism about South Africa’s new reform agenda. Citigroup and Goldman Sachs were bookrunners for the sale.

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Key Takeaways

This dollar bond sale marks South Africa’s re-entry into global financial markets amidst shifting dynamics for emerging markets. With the U.S. Federal Reserve signaling tighter monetary policy, the rising Treasury yields are expected to increase borrowing costs for emerging economies, including South Africa. The current coalition government’s reform priorities will be closely watched as investors weigh the country’s ability to deliver on economic and fiscal stability. The country’s Eurobonds recently saw yield spikes but remain below pre-election levels, showing some investor confidence in a stable reform path.

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