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Goldman Sachs Say SAGB High-Yielding Curve Emerging as a “Stand-Out”

SOUTH AFRICA
  • As the macro backdrop has normalised in other markets, SAGBs are again emerging as a stand-out high-duration and high-yielding curve with the highest FX-hedged yields out there, Goldman Sachs write in a note.
  • They add that fiscal risks remain the key risk factor embedded in the SAGB curve, which the market may find difficult to price out in an election year. Instead, Goldman Sachs think the market has had an easier time pricing a more benign inflation backdrop and eventual cuts from the SARB.
  • Within the SAGB curve pricing, the 7-10Y point of the curve is where Goldman Sachs say they find the balance between earning the high carry in the bond curve but with more anchoring as moderating inflation offsets the pricing of fiscal risks. An additional catalyst that could support this part of the SAGB curve is its relatively high beta to pricing better US growth performance, they add.
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