Markets are not pricing in the probability of South Africa’s return to investment grade, leaving scope for government bonds, stocks and the rand to rally, according to Goldman Sachs Group Inc.
The country could regain its investment status as soon as 2028 as ratings companies reward its improving finances and economic growth, a Goldman team including economist Andrew Matheny wrote in a note.
“Our baseline is that South Africa regains its first IG rating in 2028, albeit with two-sided risks to timing,” Matheny said. “Markets at this stage in our assessment largely do not price this in.”
Goldman’s analysis suggests scope for the government 10-year local-currency yield to fall more than 100 basis points to 7.6%, and the sovereign spread, or yield premium of dollar bonds over US treasuries, to outperform investment-grade emerging markets.
Five-year credit-default swaps, at around 116 basis points on Tuesday, may fall to about 100 basis points, the analysts wrote.
“Given the larger rally
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