Africa Bonds

Standard & Poor’s has surprised to the upside, revising Poland’s outlook to stable from negative while maintaining South Africa’s investment grade status last Friday. The latter decision prompted a 15bp-20bp rally in both South African sovereign and corporate debt.

Holders of South African assets face another nervous Friday waiting for a sovereign rating decision, this time from S&P.

South African assets were facing another week of uncertainty as reports emerged on Monday that ANC leaders were preparing a vote of no confidence against president Jacob Zuma and traders warned of the potential for a ratings downgrade on Friday.

Daily portfolio flows to emerging markets have fallen since the US election, with the seven day moving average declining to its the lowest level since August 2015, according to the Institute of International Finance.

Bayer, the German life sciences group, picked Tuesday night to launch the first part of its $19bn equity financing for its $66bn takeover of Monsanto. Bayer's deal comes as equity markets are revitalised by the new conviction that Western policy is shifting to reflation.

In the midst of an aggressive EM bond rout, Egypt was given a much needed boost after the International Monetary Fund approved a three year $12bn loan on Friday.

Egypt’s return to the Eurobond market could be postponed until next year after its finance ministry raised a further $2bn of funding from international banks.

South African Eurobonds rallied a half to three-quarters of a cash point this week after fraud charges against finance minister Pravin Gordhan were dropped on Monday. Now both the sovereign and FirstRand Bank are hitting the road.

Mozambique’s 2023 bond rose five cash points on Wednesday after a government official was reported to have said that principal reductions would not be imposed on creditors, but experts are sceptical and one said the comments could have been “lost in translation”.

October was the busiest month for CEEMEA borrowers on record, with $37.5bn of new bonds issued. Even if Saudi Arabia’s $17.5bn mega deal was not included, volumes were way above the five year average of $14bn. But as the US elections approach, primary issuance has wound down.

South African assets rallied on Monday after its National Prosecuting Authority (NPA) dropped fraud charges against embattled finance minister Pravin Gordhan, setting a stronger tone for FirstRand Bank to engage with investors next week.

Mozambique’s now infamous government 2023s sank to their lowest ever cash price this week, bottoming out at 57.5 cents as investors continue to digest the news that they will not be paid back in full. VTB Bank, one of the loan providers, has claimed to have been misled by the government.