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Why are SA's bonds so cheap?

11 May 2020 6:37 PM
Tags:
Bonds
Absa
South African Bonds
COVID-19
Is it a good thing or a bad thing? Michael Keenan explains why South African bonds are cheap, in the aftermath of Covid-19.

South African bonds are extremely cheap, and trade at higher levels than other countries with worse credit ratings.

On the line to The Money Show is Mike Keenan.

There was a bit of an Armageddon taking place towards the end of the first quarter. People were getting out of emerging markets, bonds in general, so South Africa fell victim to that. Then of course we got downgraded by Moody's. We were subsequently ejected from the World Government Bond Index. So everything was going pear-shaped for the bond market towards the end of March. But then a couple of interesting things happened. The Reserve Bank stepped up to the plate and said they were going to start to buy bonds - so that helped to ease fears.

Michael Keenan, currency strategist - Absa

We've seen people coming back into the market- particularly the banks. The banks now own basically a fifth of the bond market, which is a record high.

Michael Keenan, currency strategist - Absa

We have got a relatively well diversified bond market. We are well-owned by foreign investors because we have very liquid markets. So people like to play in our markets.

Michael Keenan, currency strategist - Absa

Listen to the full interview below.

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11 May 2020 6:37 PM
Tags:
Bonds
Absa
South African Bonds
COVID-19

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