South Africa trades Eurobonds after Coalition raises confidence – BNN Bloomberg

(Bloomberg) — South Africa is trading Eurobonds in its first potential international debt sale under a government of national unity after elections in May.

The dollar offering is to include a 12-year fixed note with a yield in the region of 7.4 percent, as well as a 30-year bond in the region of 8.25 percent, according to a person familiar with the matter, who asked not to be identified.

The move comes amid uncertainty for global monetary policy, with Donald Trump’s US election victory casting a shadow over what would otherwise be a positive reform story unfolding in South Africa. Its policies can keep financing costs high, complicating the environment for nations like South Africa.

“There is probably a window of opportunity to issue,” given the significant outperformance of South African bonds following the formation of the government of national unity and the compression of Eurobond spreads in emerging markets, said Samir Gadio, head of Africa Strategy at Standard Chartered Bank. “EM credit markets have been resilient so far following Trump’s election victory,” he said.

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South Africa’s dollar-denominated bonds were the worst performers in a Bloomberg Sovereign index that tracks emerging and frontier markets on Tuesday. National Eurobond yields due April 2052 rose 12 basis points to 7.83%. It is still below pre-election levels of up to 9%.

“We are very happy to see South Africa back after 30 months,” said Søren Mørch, head of emerging market debt at Danske Bank. “We are slightly positive on the post-election reform agenda and think the government deserves the benefit of the doubt.”

“The timing is decent – the spread has narrowed significantly,” said Mørch. South Africa’s treasury remains part of the country’s strong institutions, he added.

Citigroup Inc. and Goldman Sachs Group Inc. are acting as bookkeepers for the sale, which is expected to be priced later on Tuesday.

–With assistance from Hannah Benjamin-Cook.