The Treasury borrowed $1.5-billion on Monday by issuing 12-year bonds to investors at a low yield of 4.665%. The money will mainly be used to pay off maturing higher yield bonds, reducing the government's overall interest bill.

The government usually issues dollar-denominated bonds towards the end of its financial year on March 31. However, due to a flurry of favourable issuances by comparable emerging markets such as Mexico, Brazil, the Philippines and Indonesia, this issuance was brought forward. Reuters, quoting a Treasury statement, said the bond auction had attracted investors mainly from Europe and the US, and was twice oversubscribed with bids totalling $3-billion.

The transaction was significantly cheaper than borrowing locally.

Despite SA being put on a negative watch by ratings agencies, it seems there is a solid appetite for the country's debt in international markets. This appetite and the thin spread between US treasuries and the bond market is undoubtedly a.result of the negative sentiment about developedmarket debt, especially that of Portugal, Spain, Italy and Ireland.

Wikus Furstenberg, portfolio manager at Futugrowth Asset Management, said that the issuance should be looked at in the context of strong demand globally for emerging-market debt. "SA is not the only emerging market that issued debt recently, so we are not unique. Give or take a few basis points, the yield on this issuance is not too far from where existing dollar bonds are at the moment.

"Although it looks cheaper to issue 'bonds internationally rather than nationally, it is not advisable to only tap offshore markets for debt," he said.