South Africa was reported to have a hit a recession for the first time in 9 years on Tuesday. This news brought focus to the South African dwindling revenue that could deepen bond sell-off. Since August investors have discarded South African bonds with fear over the Turkish double-digit inflation which is now nearly 18%, this influenced bond sell-off in various emerging economies.
Economist were positive when the bonds inflow started picking up in July after a record high sell-off in June, the Johannesburg Stock Exchange data recorded R1.6 billion in bond inflow in July after almost R60 Billion of outflows in the second quarter. However, news of the recent recession sent the South African currency and bond tumbling, the South African rand fell the hardest against the dollar compared to other emerging economies.
The news of the bond tumbling come after the South African National Treasury and the JSE launched a new Electronic Trading Platform for Government Bonds on the 29th of August 2018. The Electronic Trading Platform is expected to position South Africa’s Capital Markets amongst the sophisticated global Capital Markets.
The JSE’s Debt Board currently lists over R2 trillion government bonds, investors loan money to the government entities by buying the listed bonds, by doing this the investors earn regular interest payments and receive the money loaned after a period.
The recession is a blow to the new President of South Africa who has been on a quest to revive the South African economy after a decade of stagnation under the former President.
By Ntsikelelo Kuse