Foreigners snap up SA dollar bond

South Africa has successfully issued a $1.25 billion 10-year bond in the international capital market to help finance its foreign currency commitments of $6.4 billion over the medium term, the Treasury said yesterday.

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 United States.

“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 4 basis points to 9.235%.

The Treasury said the new foreign bond formed part of South Africa’s 2016/17 financing programme. Its proceeds would partly finance the government’s foreign currency commitments of $6.4 billion over the 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. – Reuters