Africa Bonds

Buying the dip has driven investor activity this week with South African bonds causing them to rally despite S&P downgrading the country, and a strong indication that Moody’s will drop its rating to junk in February.

Investors in South African bonds have bought on the dip because, even as the country’s economic outlook deteriorates, the only way for bonds is up. But positive reinforcement of the country’s poor governance and deteriorating economy reduces the incentive to reform and only postpones what will be a bigger investor stampede for the exit when the time comes.

Growthpoint, the South African listed property investment holding company, has picked banks for its first public deal since 2011. Though deemed an emerging market trade because of the jurisdiction of the issuer, it also appeals to corporate or high grade funds.

After a brief sell-off in response to S&P’s decision to cut South Africa’s foreign and local currency issuer rating last Friday, South African assets rallied on Monday, as investors buy on the dip — even though the country’s economic outlook is on a downward trajectory.

Republic of Nigeria

Nigeria issued a dual tranche 10 and 30 year Eurobond this week that traded up between two and three cash points, as emerging markets (EM) assets recovered after a recent wobble.

Investors in emerging market bonds were in a celebratory mood this week as the asset class rallied back following losses last week.

Nigeria made full use of perfect funding conditions this week to print 30 year debt well inside what it paid for a 15 year bond earlier this year, drawing an impressive $11.4bn book in the process.

Citi has combined its Middle East and Africa (ex-South Africa) investment banking divisions and named a head for the new entity.

Orders for Nigeria’s 10 and 30 year bond issue had reached $5.5bn on Monday morning. The 10 year portion is likely to take the most orders, but the 30 year tranche is piquing interest, according to deal watchers.

Nigeria’s plans to issue the longest ever sub-Saharan African Eurobond outside of South Africa will be a canary in the coal mine for frontier market issuers looking to extend their curves, according to EM analysts. Virginia Furness reports.

Nigeria is set to test investors next week with the equal longest sub-Saharan African Eurobond after receiving approval to issue up to $5.5bn in its budget for 2017 on Tuesday.