Bloomberg News

South Africa Expects Sustained Foreign Demand for Bonds

October 26, 2011

(Updates with comment from treasury director-general from third paragraph.)

Oct. 26 (Bloomberg) -- Foreign investors are likely to keep buying South Africa’s bonds for as long as global interest rates remain low relative to those in the continent’s biggest economy, National Treasury Director-General Lungisa Fuzile said.

South Africa’s benchmark lending rate of 5.5 percent compares with near zero in the U.S. and 1.5 percent in the eurozone. Foreigners have been net buyers of 41.9 billion rand ($5.3 billion) of the nation’s bonds so far this year, down from 57.1 billion rand in the same period last year, according to data from JSE Ltd., which manages the data from the country’s stock and bond exchanges.

“For as long as interest rates elsewhere remain very low, and in the U.S. we have heard they will be low until 2013, and our own interest rates remain at the levels where they are, the likelihood that foreigners would walk away from our bonds is very low,” Fuzile told lawmakers in Cape Town today. “People still have confidence in South Africa’s story.”

In the mid-term budget released yesterday, the National Treasury left its estimate for the amount of funding to be raised in the domestic capital market at 150.4 billion rand for the year through March 2012. No foreign bond sales are planned this year.

The Treasury raises about 10 billion rand a week, mainly through the sale of treasury bills, and usually receives bids to buy debt worth 2 1/2 times more than is placed on offer on any given day, Fuzile said.

South African Finance Minister Pravin Gordhan told lawmakers the Treasury would ensure borrowing would remain within sustainable levels.

--Editors: Ana Monteiro, Digby Lidstone

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net.

To contact the editor responsible for this story: Andrew Barden at barden@bloomberg.net


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