JOHANNESBURG Oct 2 (Reuters) – South African government
bonds rose on Tuesday in a somewhat delayed reaction to the
country’s inclusion in Citi’s World Government Bond Index, which
analysts had predicted would lead to enthusiastic foreign
buying.
The yield on the 2015 bond fell 9 basis points to
5.37 percent, while that on the 14-year paper dropped
5 basis points to 7.51 percent.
After declining in the months leading up to the WGBI entry,
bond yields edged up on Monday, the first day of inclusion, as
last week’s downgrade of South Africa’s government bond rating
by Moody’s and poor economic data dampened sentiment.
Moody’s cited worries about the country’s institutions and
its future political stability as drivers behind its decision to
cut the rating by one notch to Baa1 from A3.
Data released on Friday also showed South Africa’s trade
deficit widened to 12.2 billion rand in August, compared with a
6.7 billion rand shortfall in July.
“Those together pretty much negated the positive influence
that the WGBI had,” said Jonathan Myerson, head of fixed income
at Cadiz Asset Management.
However, Myerson said he expected the inclusion to support
the market over the long term.
“Previously, when foreigners bought our bonds we were almost
very nervous that the more they buy, the more they can sell,” he
said. “The inclusion should provide some move towards increasing
stability in local yields.”
Africa’s biggest economy became the 23rd country to join the
WGBI on Monday when 12 government bonds entered the index, which
is tracked by funds with an estimated $2 trillion in assets
under management.
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