The 12 months through the end of May saw South African investors pivoting to fixed income investments while balanced funds suffered outflows, according to Morningstar Research data.
The tilt towards fixed-income assets came as investors sold off South African government bonds, especially those with longer-dated maturities, as they awaited the outcome of the 29 May national and provincial polls. Since the beginning of June, domestic government bonds have rerated and declined by about 80 basis points (see graph below).
‘The government’s 10-year borrowing rate fell [around 80 basis points] to 11.4% [per year] as the country’s perceived credit risk improved,’ wrote Peter Little, fund manager at Anchor Capital, in a note to investors about the bond market’s June performance. ‘The drop in [South Africa’s] long-term borrowing rates boosted the performance of the JSE All Bond index which gained 5.2% month-on-month.’
