The Market Has Already Downgraded South Africa to Junk

Moody’s Investors Service hasn’t said it, but investors already think it: South Africa’s credit is junk, Bloomberg News reported. The company, which rates South Africa’s debt Baa3, the lowest investment level, is due to review its assessment in November. Given Eskom Holdings SOC Ltd.’s financial woes and its implications for government debt, the market is pricing in a downgrade. The premium investors demand to hold South Africa’s dollar bonds rather than U.S. Treasuries is almost twice as much as the average for investment-rated emerging markets. It’s also wider than the spread for Brazil, which has a non-investment grade rating from Moody’s, S&P Global Ratings and Fitch Ratings. Read more