Not all investors are running for the door as bond yields spike
Some traders are seeing the silver lining in benchmark bond yields rising to their highest since January as markets react to the Cabinet reshuffle
As the rand tumbled and bond yields surged while SA’s political drama unfolded, not all investors were running for the exit. Foreigners bought a net R11.2bn of South African bonds in the week ending March 31, more than double the previous week and the most since the five days ending on June 24, according to JSE data. The inflows continued even after President Jacob Zuma fired finance minister Pravin Gordhan on Thursday. Zuma’s Cabinet changes raised concern about the country’s fiscal path and credit ratings, sending the rand tumbling to its worst week since December 2015 and benchmark bond yields to the highest since January. That makes them a buy, said Phoenix Kalen, London-based director of emerging-market strategy at Société Générale. "Despite the fraught political situation in which SA currently finds itself, dynamics past the immediate horizon favour outperformance in the country’s assets," Kalen said in a note March 31 recommending investors buy the country’s 2048 rand bonds. ...
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