The bond launch follows a March roadshow where Finance Minister Pravin Gordhan sought to reassure investors about continuity in fiscal policy after President Jacob Zuma changed finance ministers twice in less than a week in December.
In a statement, the Treasury said the dollar bond, with a coupon of 4.875%, had been more than two times oversubscribed, with an investor base primarily located in Europe and the US.
“The South African government sees the success of the transaction as an expression of investor confidence in the country’s sound macro-economic policy framework and prudent fiscal management,” it said.
The rand extended gains against the dollar after the Treasury’s statement, climbing to a session high of 15.0600, up 1.2% for Thursday’s close.
Government bonds also edged higher, with the benchmark government issue due in 2026 dipping four basis points to 9.235%. The Treasury said the new foreign bond formed part of South Africa’s 2016/2017 financing programme.
Its proceeds would partly finance government ’s foreign currency commitments of $6.4-billion (R97-billion) over medium term. The coupon for the bond represents a spread of 335 basis points above the 10-year US Treasury benchmark, which analysts said was in line with South Africa’s current funding rate. “I don’t think it’s too expensive.
If you have a look at our CDS rates, that’s at 385,” Rand Merchant Bank trader Gordon Kerr said, referring to credit default swops, or the cost of insuring exposure to South African debt.
