A reprieve from Moody’s, which held South Africa’s credit rating above junk status at the end of last week and lifted its outlook to stable, boosted the rand and sent yields on the country’s benchmark bonds to their lowest in almost three years.

The South African currency rose around 1 per cent against the dollar on Monday to R11.6142 — its strongest level this month — after the ratings decision on Friday.

A downgrade by Moody’s would have kicked South Africa out of international indices followed by bond investors, causing problems for the financing of government debts; the brighter outlook now means that is unlikely even in the medium term.

Yields on the country’s benchmark bonds, due in December 2026, fell 14 basis points (0.14 percentage points) to 7.85 per cent, Bloomberg data show. That was the lowest since April 2015. Yields fall when demand for bonds rises.

Analysts at Commerzbank said that while a decision by Moody’s not to cut South Africa’s rating was “more or less priced in as the rating agency was expected to give the new Ramaphosa cabinet a shot at establishing a new economic reform programme”, the outlook upgrade was a surprise.

Commerzbank surmised that while details of the reform package were “not all clear yet”, Moody’s “probably . . . believes [the new cabinet] will implement an appropriate reform agenda, however successful”, and that vote of confidence should shore up the rand.

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