SA issues first euro bonds in 8 years

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NewRandMoney Reuters.

Cape Town - South Africa sold its first euro-denominated bonds in more than eight years and issued 30-year dollar bonds today.

The country sold 500 million euros ($676 million) of July 2026 notes at 225 basis points above the euro mid-swap rate, according to data compiled by Bloomberg.

That is tighter than an initially-marketed range of about 240 basis points, according to a person familiar with the matter who asked not to be identified because the information is private.

It also sold $1 billion of July 2044 bonds at a 220-basis point premium to similarly-dated Treasuries, compared with a range of about 240 basis points.

South Africa joined emerging-market issuers from Indonesia to Ivory Coast seeking to lock in favourable rates with longer-term debt.

The sale is South Africa’s first euro-denominated bonds since 2006, when it issued 750 million euros, according to data compiled by Bloomberg.

It sold $750 million of 30-year dollar debt in March 2011 at 180 basis points over Treasuries.

“Global capital markets remain remarkably amenable to South African credit,” Mohammed Nalla, the head of strategic research at Nedbank’s investment-banking unit in Johannesburg, said by phone.

“We should be tapping that, and some people would even argue that we’re maybe not tapping it aggressively enough.”

Falling Yield

The Treasury won’t comment on pricing, spokesman Jabulani Sikhakhane said by phone from Pretoria.

Tshepiso Moahloli, director of debt issuance and management at the Treasury, was not immediately available, her office said.

Standard & Poor’s cut South Africa’s credit rating on June 13 by one level to BBB-, on par with Russia and Brazil.

Fitch Ratings reduced the outlook on its BBB assessment, the second- lowest investment grade, to negative from stable the same day.

South African dollar debt returned 6.8 percent this year, compared with an average 8.8 percent for emerging-market bonds, according to Bloomberg indexes.

The South African Reserve Bank raised its benchmark interest rate by a quarter of a percentage point to 5.75 percent today as it moves to tighten monetary policy gradually in the face of slowing economic growth.

The yield on South Africa’s euro bonds due in 2016 declined 40 basis points, or 0.4 percentage point this year through yesterday to 1.22 percent, according to data compiled by Bloomberg.

Ivory Coast sold 10-year bonds that were priced to yield 5.625 percent yesterday, or 309 basis points over Treasuries.

Kenya’s $1.5 billion of debt due June 2024 was priced to yield 6.875 percent at a sale last month. - Bloomberg News

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