Demand surges for South Africa bonds before election

The JSE building in Sandton. (Fivepointsix/Getty)

The JSE building in Sandton. (Fivepointsix/Getty)

Investor demand surged at South Africa’s weekly government bond sale on Tuesday, a day ahead of a general election that could be pivotal for markets.

Primary dealers placed orders for R16.2 billion of debt, more than four times the R3.75 billion rand of securities on sale. This compares with a bid-to-cover ratio of 3.6 at the previous auction, according to central bank data compiled by Bloomberg.

Buying bonds at the sale gives investors the opportunity to participate in a so-called non-competitive auction on Thursday, where more of the debt could be acquired at today’s clearing yield. That amounts to a “free call option,” according to Hanna de Nobrega, an economist and quantitative analyst at Prescient Investment Management.

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