South Africa’s National Treasury is preparing for a potential Eurobond sale and anticipates strong international demand, driven by an improved economic outlook. The government is considering raising approximately $2.7 billion from global markets to help meet its foreign-currency funding requirements for the fiscal year, stated Director-General Duncan Pieterse.
Pieterse confirmed that the Treasury has already secured about $2.6 billion of its $5.3 billion foreign financing plan. The remaining balance is expected to be sourced from a Eurobond, bilateral funding, or a combination of both, though the precise timing of the issuance was not disclosed.
The confidence for the upcoming sale is bolstered by positive domestic performance. “We [are] seeing strong demand on the local currency side, and we expect that to carry through on external debt should we go forward with the Eurobond soon,” Pieterse said in an interview.
This improved market sentiment follows S&P Global Ratings' decision to upgrade South Africa's credit rating earlier this month — the first such upgrade in nearly two decades. The move was supported by the government's demonstrated commitment to fiscal consolidation, better-than-expected revenue collection, and the adoption of a more ambitious 3% inflation target.
Market Sentiment: Market sentiment toward South African debt is notably positive. This is clearly reflected in the performance of the country's dollar-denominated bonds, which have delivered a 15% return this year, outperforming a key emerging-market index. Furthermore, the sovereign risk premium, or spread, that investors demand to hold South African debt over U.S. Treasuries has narrowed significantly to 222 basis points, from 396 in April. This tightening of spreads, especially when compared to the high-yield emerging market average of 476 basis points, indicates growing investor confidence and suggests the Eurobond will likely be met with a strong appetite.
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