Africa’s dollar debt outperforms on haven bid

As investors want to protect their funds from the consequences of the Ukraine conflict, African hard-currency government debt, all of which is rated junk, is finding buyers.

Four of the nine developing countries whose debt has increased as a result of the risk-off mood are African countries that are geographically separated from the conflict and export some of the commodities that have risen as a result of it.

South Africa is leading the pack, despite being rated three steps below investment grade by S&P Global Ratings. The country’s dollar bonds have returned 1.75 percent this month, compared to the Bloomberg Emerging Markets USD Sovereign Index’s 2.3 percent average loss.

“South African bonds are now clearly benefiting from the paradigm shift that we are seeing in eastern Europe. It is all about relative stability,” said Simon Quijano-Evans.

Outperformance has been fueled by re-allocation as well as other factors, including: “higher oil prices, which have helped the likes of Angola, Gabon and Nigeria,” he said.