ON THE MONEY
It will help that ratings agencies have seen worse among our peers
Not so fast: does SA deserve to be in the same bucket as Turkey and Brazil in credit terms?
The ratings agencies are here. Meetings are going on this week between their analysts and government representatives. Soon we will be told whether the government is creditworthy — how much investors should trust it. The level of trust is reflected in the yield on government bonds, the interest that investors demand to be paid before they will hand over their cash to the government. Currently, the benchmark R186 is trading at a yield of 9.01%. Some suggest a downgrade is already priced in by comparing it with countries that have already lost their investment-grade status, such as Russia. A bond of equivalent duration there trades at 8.77%. But Russia is a poor comparison. Its credit rating is heavily influenced by political issues such as sanctions against the country and its problematic role in the Middle East, not to mention its neighbours. While Russia has been under severe economic pressure, the stabilisation of commodity prices has helped revenues in 2016. Its yields have been t...
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