SA local bonds one of best trades in 2020 – BofA Global Research

BofA Global Research predicted long-term South African government bonds were in line for a stellar start to next year thanks to high risk premiums and a consensus that a Moody’s downgrade was inevitable.

“We think long term ZAR local bonds may be one of the best trades for 2020, especially for Q1,” BofA’s cross asset strategist David Hauner wrote in his emerging markets outlook for 2020.

A lot of investors – especially locally – seemed to wait for the downgrade to finally step in and buy while markets had barely priced in potential positive surprises from the February budget and two possible interest rate cuts in the second quarter of the year, Hauner said.

Meanwhile, Lebanon was at high risk of default in the first quarter of 2020, BofA said, adding it was less optimistic than many investors that foreign support to help shore up the country’s pressured finances would be coming forward.

“Even if it comes, would likely not stop the silent depletion of reserves,” BofA’s Hauner said.