Investors are diving back into SA corporate debt

A relatively stable rand, falling inflation expectations and steady interest rates have helped to resurrect corporate-bond sales in South Africa after a decline last year.

Companies in Africa’s most industrialised economy have raised R65.5 billion ($4.5 billion) this year, compared with R42 billion in the comparable period in 2018, according to data compiled by Bloomberg.

“There is a shortage of corporate bonds with a good credit ratings in the market, and spreads keep compressing because demand outweighs supply,” said Michelle Wohlberg, a bond analyst at Rand Merchant Bank in Johannesburg. Still, corporate yield premiums “provide a nice uptick over government bonds,” she said.

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Financials account for 78% of corporate issuance this year. The biggest issuer was Standard Bank, with R11.7 billion, surpassing last year’s leader, FirstRand, Absa is the leading arranger, followed by Standard Bank and then FirstRand.

South African corporate bonds have returned 6.9% this year in dollar terms, more than the 5.8% average for emerging markets and beating the 5.1% return on South African government bonds, according to Bloomberg Barclays indexes.