‘Local bonds offer investors significant opportunity’

Date: April 12, 2021 | Posted in Business News | News

For foreigners, it’s a no brainer for local investors to invest in SA bonds: PortfolioMetrix’s Philip Bradford.

South African bonds are currently offering the highest real yields in the world. The yields on long-dated local bonds are as much as 9.0% higher than equivalent instruments in the US, and 11.0% above those in Europe.

These yields are reflecting the market’s view of the risks facing South Africa’s fiscal position. However, in the view of PortfolioMetrix’s South African head of investments, Philip Bradford (pictured), they are also offering investors a meaningful opportunity.

“My UK colleagues are so jealous of our bond yields,” Bradford said. “For foreigners, it’s a no brainer for local investors to invest in SA bonds.”

South African investors, he believes, are often too “emotionally involved” when assessing the country’s risk factors. Foreign investors, however, are seeing through the noise and rationally focusing on the opportunity relative to the risks.

Locking in yields

“Very often, you have to swim upstream as a fund manager and go against what the average investor would want to do,” said Bradford, who manages the PortfolioMetrix BCI Dynamic Income fund. “That means buying local bonds when the trouble is happening, as we have done in the last couple of weeks.

“We went from our lowest bond exposure ever to doubling that in a week or two because markets had sold off and we could lock in yields of around 11.5% for our investors.”