{"id":334203,"date":"2019-08-12T12:33:20","date_gmt":"2019-08-12T10:33:20","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=334203"},"modified":"2019-08-12T12:33:49","modified_gmt":"2019-08-12T10:33:49","slug":"the-market-has-already-downgraded-south-africa-to-junk","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/334203\/the-market-has-already-downgraded-south-africa-to-junk\/","title":{"rendered":"The market has already downgraded South Africa to junk"},"content":{"rendered":"

Moody\u2019s Investors Service hasn\u2019t said it, but investors already think it: South Africa\u2019s credit is junk.<\/p>\n

The company, which rates South Africa\u2019s debt Baa3, the lowest investment level, is due to review its assessment in November. Given Eskom Holdings SOC Ltd.\u2019s financial woes and its implications for government debt, the market is pricing in a downgrade.<\/p>\n

These three charts show how traders view the country\u2019s fiscal outlook:<\/p>\n

\"\"<\/a><\/p>\n

The premium investors demand to hold South Africa\u2019s dollar bonds rather than U.S. Treasuries is almost twice as much as the average for investment-rated emerging markets.<\/p>\n

It\u2019s also wider than the spread for Brazil, which has a non-investment grade rating from Moody\u2019s, S&P Global Ratings and Fitch Ratings. The risk premium has climbed since mid-July, when the government announced it would increase borrowing to support Eskom.<\/p>\n

\"\"<\/a><\/p>\n

South Africa isn\u2019t benefiting from the global hunt for yield. While average local-currency yields for emerging markets have been falling, South Africa\u2019s have been rising.<\/p>\n

The premium of South African yields over developing-nation peers is now at the highest since February. That suggests investors are positioning for fiscal deterioration, and a credit downgrade.<\/p>\n

\"\"<\/a><\/p>\n

The cost of insuring South Africa\u2019s debt against default is much higher than that of Russia, which has a similar Baa3 rating with Moody\u2019s. It\u2019s also higher than Brazil, rated two levels lower.<\/p>\n

Moody\u2019s has been \u201ctoo kind,\u201d said Win Thin, head of currency strategy at Brown Brothers Harriman & Co., who predicts South Africa\u2019s credit rating may fall three levels into junk.<\/p>\n

\n

Read: The rand is now the worst-performing currency in the world: analyst<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Moody\u2019s Investors Service hasn\u2019t said it, but investors already think it: South Africa\u2019s credit is junk.<\/p>\n","protected":false},"author":59,"featured_media":24779,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[26],"class_list":["post-334203","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/334203","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=334203"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/334203\/revisions"}],"predecessor-version":[{"id":334215,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/334203\/revisions\/334215"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/24779"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=334203"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=334203"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=334203"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}