The Reserve Bank in Pretoria. Picture: FINANCIAL MAIL
The Reserve Bank in Pretoria. Picture: FINANCIAL MAIL

Demand soared at a weekly auction of South African government bonds as local investors stepped in to snap up yields pushed higher by foreign selling.

The primary dealers that buy bonds directly from the government placed R16.3bn of orders, or almost seven times the R2.4bn of securities on sale, according to data published by the Reserve Bank. That’s the most since March, when the government reduced the amount of notes sold every week from R3.3bn.

The auction showed that there is plenty of demand for government bonds from SA’s R2.3-trillion investor base, even as foreigners dump the debt. Non-residents have off-loaded a net R63.6bn of South African bonds since the beginning of April amid an emerging-market sell-off sparked by rising US rates, a stronger dollar and geopolitical tensions, including Turkey’s financial crisis.

The outflows reached a 30-day average of R1.8bn in mid-June, the most on record, with yields on benchmark 2026 securities rising to 9.15%. Levels above 9% "look attractive", according to Deon Kohlmeyer, a trader at FirstRand Bank.

Investors were also locking in yields before the release of consumer-price data on Wednesday, Kohlmeyer said. The inflation rate probably climbed to 5.1% in July, from 4.6% the previous month, according to the median estimate of economists in a Bloomberg survey. Yields could fall if the rate undershoots expectations.

Yields on the 2026 notes dropped two basis points on Tuesday to 9%.