Picture: REUTERS
Picture: REUTERS

SA is back in the eurobond market for the first time since May 2018, looking to offer securities with returns that compensate investors for mounting fiscal woes.

The government is marketing 10- and 30-year dollar securities with yields of between 5% and 5.125%, and about 5.875%, respectively, according to a person familiar with the transaction who asked not be identified because they are not authorised to speak about it.

Average yields on SA’s dollar bonds fell 163 basis points between the start of the year and early September to 4.7%, according to JPMorgan Chase’s indices, amid a dovish turn by global central banks. They have since climbed to 4.95% as concern mounts over the financial burden of state-owned enterprises, such as Eskom.

“Over the past few weeks, SA external bonds have under-performed compared to their peers, so the cheapening up should raise sufficient interest to compensate for the increasing fiscal concerns,” said Trieu Pham, a strategist at ING Groep in London. “The initial price talk’s quite juicy compared to the outstanding curve.”

Yields on $2bn of bonds due in October 2028 had risen two basis points to 4.64% by 2.58pm in Johannesburg. They have risen by about 40 basis points since early September.

The government’s 2019 budget stipulated that it would raise the equivalent of $2bn on international capital markets. A further $2bn is outstanding from the 2018/2019 fiscal year.