SOVEREIGN RATINGS
The capital outflow cliff may be less sheer than predicted
The bond market has been on tenterhooks this week, not because of the monetary policy committee meeting, the October inflation report or developments to the north, but rather the threat of a dual downgrade by rating agencies S&P Global Ratings and Moody’s Investors Service. The adverse turn in SA’s rating in 2012 coincided with the country’s inclusion in the Citigroup World Government Bond Index (WGBI). After five years, we are finally at the precipice of being excluded from the WGBI, as well as the Barclays Global Aggregate Index (BGAI). Rather than taking a strong view on whether the required downgrades will happen this week, the focus has been on the capital flow implications. To be sure, the fundamental pressure on the rating is acute. Yet there is an incentive for the rating agencies to stay put until after the ANC’s national conference in December and the February 2018 budget statement before making a high-impact call. The index criteria have endogenised the sovereign credit r...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.