Foreigners bought almost R10bn worth of local bonds over the past week, ignoring the noise attached to the credit ratings downgrades by Fitch Ratings and S&P Global Ratings. Both downgraded SA to junk status last week, triggering concern about outflows from equities and bonds. But the local bond market attracted a net R9.92bn in inflows from offshore buyers last week, bringing the tally in bond inflows to just more than R20bn over the past two weeks. "The sharp inflows are in stark contrast to actual fundamentals, which have deteriorated in the last two weeks, and may imply that it has been driven by foreign investors’ search for yield," Nedbank Corporate and Investment Banking analysts said in a note. "In this case, a turn in sentiment will result in volatile foreign flows, and sharp outflows if safe-haven demand were to pick up substantially." The yield on the benchmark R186 government bond has been hovering near 9%, comparing favourably with its US equivalent, the 10-year Treasur...
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