Treasury bond issue: a risky business?
SA is borrowing at higher rates to pay off existing debt, but the government is happy it has been able to do so at prices it considers more than fair
The National Treasury is pleased as punch with its $5bn dollar-denominated bond issue, which was almost three times oversubscribed and is thought to be the largest yet out of Sub-Saharan Africa. But some local economists say SA opting for offshore funding is a relatively expensive option that comes with additional risk.
The Treasury regards the coupons of 4.85% for the 10-year bond (which is 313 basis points [BPS] above the 10-year US benchmark bond) and 5.75% for the 30-year bond (a spread of 358.6BPS), achieved on September 23, as "favourable" even though this is a little higher than at some times in the past. In 2016, SA issued a 12-year dollar bond at 4.3% and a 30-year one at 5%.