The Impact of COVID-19 on the Risk Factors Affecting the South African Bond Market

Abstract

Purpose: The purpose of this study is to analyse the effect of COVID-19 on the risk factors affecting the South African bond market. The global economy has resulted in a couple of total shutdowns in 2020 to minimise the spread of the COVID-19 virus. This has resulted in significant adjustments in monetary and fiscal policies to address the impact on the fiscus. South Africa also adopted a couple of adjustments which saw a drastic spike in the nominal debt issued to fund the increased budget shortfall. This came immediately after South Africa's exit from the World Government Bond Index after being rated sub-investment by all three major rating agencies.

Design/Methodology/Approach: The study takes inferences from experiences from some leading emerging markets with the same attributes as South Africa. The study further looks at graphical presentation and descriptive statistics for data analysis.

Findings: It was found that, even though South Africa is still well below the risk measures for debt management, the quantum of debt has increased significantly, thus putting pressure on the fiscus in absolute terms.

Paper Type: Research paper.