South Africa raised $5 billion in its biggest Eurobond sale to date, offering returns that compensated investors for increasing fiscal problems.<\/p>\n
The deal on Monday was split between a $2 billion 10-year tranche and $3 billion of 30-year notes, yielding 4.85% and 5.75% respectively.<\/p>\n
Average yields on South Africa\u2019s dollar bonds fell 163 basis points between the start of the year and early September to 4.7%, according to JPMorgan Chase & Co\u2019s indexes, amid a dovish turn by global central banks.<\/p>\n
Since then they have climbed to 4.98% as concern mounts over the financial burden of highly-indebted state companies such as Eskom Holdings SOC Ltd.<\/p>\n
\u201cOver the last few weeks, South African external bonds have underperformed versus peers, so the cheapening up should raise sufficient interest to compensate for the increasing fiscal concerns,\u201d Trieu Pham, a strategist at ING Groep NV in London, said before the Eurobond sale was completed.<\/p>\n
The initial price talk was around 5.25% for the 10-year offering and 6.125% for the longer securities.<\/p>\n
South Africa last came to the Eurobond market in May 2018, issuing $2 billion of 12- and 30-year debt.<\/p>\n
Yields on the latter rose 1 basis point to 5.58% on Monday.<\/p>\n
The government\u2019s 2019 budget stipulated that it would raise the equivalent of $2 billion on international capital markets. A further $2 billion is outstanding from the 2018-19 fiscal year.<\/p>\n