South African government bonds may attract as much as $8 billion in foreign investment because of their inclusion in Citigroup Inc. (C:US)’s World Government Bond Index on Oct. 1, the U.S. bank said.
The bonds will become the fifth emerging-market country’s debt to be listed on the 23-member index when added from the close of trade on Sept. 28. The debt will have an index weighting of about 0.45 percent, the bank’s Sub-Sahara Africa Strategist Leon Myburgh said at a media briefing in Johannesburg today. South African government bonds have an average yield of 6.63 percent, the highest on the gauge.
Citigroup said on April 17 that the country may be eligible for inclusion. Less than $1 billion of the about $6.5 billion in net foreign inflows to sovereign debt since then is probably attributable to the announcement, Myburgh said, and as much as $7 billion may follow. Inflows to other emerging markets including Poland and Brazil have also been strong, he said.
“It’s a very important milestone for South Africa; a vote of confidence,” Citigroup Country Officer for South Africa Donna Oosthuyse said. “It’s good for the index as well as it allows us, the sponsor, to diversify. Yields on South African bonds are relatively high so they are attractive for investors.”
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