Demand soars at SA bond sale as local investors step in

Demand soared at a weekly auction of South Africa government bonds as local investors stepped in to snap up yields pushed higher by foreign selling.

The primary dealers that buy bonds directly from the government placed R16.3 billion ($1.1 billion) of orders, or almost seven times the R2.4 billion of securities on sale, according to data published by the central bank. That’s the most since March, when the government reduced the amount of notes sold every week from R3.3 billion.

The auction showed that there is plenty of demand for government bonds from South Africa’s R2.3 trillion investor base even as foreigners dump the debt. Non-residents have offloaded a net R63.6 billion of South African bonds since the beginning of April amid an emerging-market sell-off sparked by rising US rates, a stronger dollar and geo-political tensions including Turkey’s financial crisis.

The outflows reached a 30-day average of R1.8 billion in mid-June, the most on record, with yields on benchmark 2026 securities rising to 9.15%. Levels above 9% “look attractive,” according to Deon Kohlmeyer, a trader at Firstrand Bank in Johannesburg.

Investors were also locking in yields before the release of consumer-price data on Wednesday, Kohlmeyer said. The inflation rate probably climbed to 5.1% in July, from 4.6% the previous month, according to the median estimate of economists in a Bloomberg survey. Yields could fall if the rate undershoots expectations.

Yields on the 2026 notes dropped two basis points on Tuesday to 9%.