30-year bond priced at 6% yield

2011-03-02 10:50

South Africa’s $750 million (R5.2 billion) 30-year global bond issued this week was priced at a yield of 6.292%, a spread of 180 basis points above 30-year US treasuries, the Treasury said today.

Investor response to the bond was “exceedingly good” given turmoil in the Middle East. Bids received were more than four times the value of the deal, it added.

The Treasury said in its budget statement last week the government intended to borrow about $1 billion a year in global markets to maintain benchmarks in major currencies and meet part of its foreign currency commitments.

Today, it said this week’s issuance, which marks the first time South Africa has issued a bond of this duration in international capital markets, represented pre-funding for the next fiscal year beginning on April 1.

“The 2041 bond lengthens the duration of the sovereign’s dollar bond yield curve. This will establish a benchmark for other South African entities that may issue long dated bonds in the US dollar capital markets,” it said.

The Treasury said 156 investors had placed orders for the bond, with 68.6% originating from the United States, 18.2% from Europe, 11.6% from Asia and 1.6% from South America.

South Africa last week forecast a wider-than-expected budget deficit of 5.3% of GDP for the financial year ending March next year, compared with the 4.6% gap seen in October last year, sending the yield spread between the 2015 and 2026 notes to record highs.

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