Eskom Bonds Are Trading Like There's a Rescue Plan in Place

There’s been enough bad news about South Africa’s state-owned electricity company in recent months to rattle the hardiest bond investor. Or so you’d think. Even before President Cyril Ramaphosa said on Tuesday the nation won’t allow Eskom Holdings SOC Ltd. to fail, the company’s bonds were trading as if its troubles were over, Bloomberg News reported. The premium investors demand to hold the company’s 10-year dollar bonds rather than U.S. Treasuries dropped this week to the lowest since the securities were issued in August. That suggests traders were bullish about a much-anticipated rescue plan for the utility, deemed “too big to fail” by the World Bank. Ramaphosa, who previously poured cold water on Eskom’s proposal that the government take over some of its debt, said the country will announce a package of measures to fix the company. He might reveal the outlines of this strategy in his state-of-the-nation speech on Thursday. Read more