Tuesday's weekly Treasury auction drew orders totaling 16.3 billion rand, or $984 million, for just 2.55 billion rand of bonds, making it the most sought after sale in four months. The overall bid-to-cover ratio printed at 6.3, surpassing the prior week's roughly 5.9 and setting a new high since the June 2 auction. Demand has also been similarly strong at the last two sales, running at roughly double the interest seen in early September.
The 2037 line drew the most interest, with bids totaling 7 billion rand against an available allotment of 850 million rand. Bonds maturing in 2033 saw 4.97 billion rand in demand, while the 2040s picked up 4.3 billion rand. By 1:21 p.m. in Johannesburg, the yield on the 2037s was down six basis points at 9.07%.
South Africa's yields sit near the top of the emerging market league table, with only Mexico, Brazil, Colombia and Turkey offering higher returns among major peers. That backdrop, plus fresh cash from September coupon payments, helped fill the order book. Bloomberg's calculations suggest investors had about 17.7 billion rand of South African government bond coupons to put back to work last month.
Demand for a country's bonds is the clearest vote of confidence it can get. Market Briefs tracks emerging market debt free every weekday.
Global fixed income has been under pressure, with rising policy rates and higher energy costs spurring a broad selloff. Over the last month, South Africa's 10 year yield moved up by more than half a percentage point to above 9%. The currency also firmed, with the rand up 0.7% and trading at 16.53 per dollar.
High local yields plus steady reinvestment cash created a sweet spot for bond buyers this week. If you watch rates to gauge income opportunities, the combination of elevated yields, resilient demand at auction and a firmer rand sketches a market where investors are still showing up for carry, even after a rough global month.
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