{"id":474444,"date":"2021-03-09T15:54:33","date_gmt":"2021-03-09T13:54:33","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=474444"},"modified":"2021-03-09T15:54:33","modified_gmt":"2021-03-09T13:54:33","slug":"weak-bond-sale-raises-flag-for-south-africa-debt-costs","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/474444\/weak-bond-sale-raises-flag-for-south-africa-debt-costs\/","title":{"rendered":"Weak bond sale raises flag for South Africa debt costs"},"content":{"rendered":"

South Africa\u2019s weakest bond auction this year spells trouble for the government\u2019s plans to reduce debt costs.<\/p>\n

The lowest demand since Dec. 1 raises concerns that the Treasury may struggle to finance its budget deficit in a macro environment of rising global yields and large outflows from the domestic bond market.<\/p>\n

While debt issuance is above target for this fiscal year, the government decided to keep sale amounts at current levels, reducing only the extra amount investors may buy through a non-competitive auction, further damping demand.<\/p>\n

Adding to traders\u2019 concerns was data on Tuesday that showed South Africa\u2019s economy contracted the most in a century in 2020 as restrictions to curb the spread of the coronavirus pandemic ravaged output and disrupted trade.<\/p>\n

\u201cWhen the National Treasury decided to reduce the non-comp optionality but keep bond issuance the same till the end of the financial year, the market perceived this as negative news,\u201d said Michelle Wohlberg, a Johannesburg-based fixed-income analyst at Rand Merchant Bank.<\/p>\n

\u201cWe saw how this played out in today\u2019s auction with bid-to-cover ratios at the lowest we\u2019ve seen this year.\u201d<\/p>\n

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

The primary dealers who buy bonds directly from the government placed orders for R11.5 billion ($749 million) of securities at Tuesday\u2019s auction, or 1.7 times the R6.6 billion on sale.<\/p>\n

The sale took place against the backdrop of a selloff by foreign investors, with a 10th straight day of net sales on Monday bringing year-to-date outflows from the bond market to $2.4 billion.<\/p>\n

\u201cAlthough we\u2019ve seen local real-money accounts buy bonds into weakness, it hasn\u2019t been to the same extent that foreign selling has been,\u201d said Wohlberg.<\/p>\n

Yields on rand-denominated bonds rose following the debt sale. Those on notes maturing in 2040 were the least in demand at the auction and climbed a sixth day by three basis points to 11.24%. That\u2019s the highest since November.<\/p>\n

South Africa Reserve Bank has tempered its debt-buying program, meaning there is now less of a backstop for the country\u2019s yields. Data released Friday showed the bank\u2019s holdings of government securities dropped for the first time in a year, suggesting it has been less active in the secondary market.<\/p>\n

\n

Read: South Africa\u2019s GDP per capita has shrunk to levels last seen in 2005<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa\u2019s weakest bond auction this year spells trouble for the government\u2019s plans to reduce debt costs.<\/p>\n","protected":false},"author":59,"featured_media":222767,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26,3114],"class_list":["post-474444","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline","tag-rand-merchant-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/474444","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=474444"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/474444\/revisions"}],"predecessor-version":[{"id":474450,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/474444\/revisions\/474450"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/222767"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=474444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=474444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=474444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}