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April 25, 2019
S&P and Fitch awarded junk status to SA in April 2017 following president Zuma’s cabinet reshuffles. Yields moved higher during most of 2017 but have fallen sharply in early 2018 after the election of Ramaphosa as President. However, nearly all these gains were given back during the second half of 2018 before easing again during the first quarter of 2019. Bigger counter-cyclical and infrastructure spending and elaborate education, welfare and health systems envisaged by government over the next few years, will cause upward pressure on the borrowing requirement as a ratio of GDP. This in turn may cause upward pressure on bond yields.
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