South African government bonds were among the most heavily-traded in European secondary markets on Friday morning, as the turmoil surrounding the ousting of finance minister Pravin Gordhan meant the treasury failed to complete a new planned sale of short-term debt.
A range of South African assets have been hit by the departure of Mr Gordhan, who was well-respected by international investors but came into frequent conflict with the president Jacob Zuma.
Investors have been trading South African government bonds in unusually high numbers, as analysts predict the government will lose the investment-grade credit ratings it narrowly held onto last year.
At publication time, the country’s benchmark 10-year bond was the 4th-most heavily traded sovereign bond in Europe, behind only two gilts and one US bond, according to Trax, a MarketAxess company.
Yields on the country’s 10-year debt, which rise when prices fall, have jumped almost 50 basis points (0.5 percentage points) this week, to 8.857 per cent. That includes two daily rises of more than 30bps, and a brief 21.5bps rebound yesterday.
Referring to the sharp moves during a press conference this morning, Mr Gordhan said:
Both as government and as South Africans we are paying extra to actually borrow money. We were hoping for example today to raise 600m rand in the bond market on a short-term basis, and bids of just over 200m rand were actually offered because there is this concern about the economy arising from the announcements made yesterday.
Even before today, March had become a record month for trading volumes in South African government bonds. More than €15bn worth of the country’s bonds have been traded in the European market, according to Trax. That is the largest number on record, and 52 per cent larger than the average monthly volume since July 2013.