Demand wanes for SA’s bonds amid Eskom bailouts

Demand at SA’s weekly bond auction fell after the country raised issuance to a record, partly to fund the rescue of troubled state-owned enterprise (SOE) Eskom.

Traders placed R10.3bn of orders, or 2.3 times the R4.53bn of securities on sale, at the scheduled weekly Treasury auction on Tuesday, according to data published by the Reserve Bank. This compares with a bid-to-cover ratio of 3.3 at the previous sale on July 30. The average for the previous four auctions was 3.6.

The Treasury raised the amount of bonds on sale at weekly auctions by 37%, from R3.3bn previously, as a sluggish economy weighs on tax collection at a time when SOEs, including Eskom, are clamouring for bailouts.

Bonds pared gains after the sale, with the yield on government debt due December 2026, one of the securities on sale, climbing two basis points from the pre-auction level to 8.41%. Yields on the 2030 and 2035 securities also climbed.

SA bonds have lost 5.4% this month in dollar terms, the worst performance among emerging-market sovereigns and more than the average loss of 1.8%, according to Bloomberg Barclays indices.

Bloomberg