Banks’ FLAC debut powers a record Q1 for SA debt markets

17 April 2026
8 min read

Q1 2026 saw record levels of primary market activity, with almost R43 billion issued in local debt capital markets (Q1 2025: R27 billion). Banks made their debut FLAC issuances, which provided a meaningful boost to supply while investor participation remained strong.

Source: JSE, RMB Global Markets Research

Gross term issuance was substantially higher in Q1 2026 at R43 billion (Q1 2025: R27 billion). Banks/financials dominated supply at R30 billion, with the banks’ inaugural FLAC issuances constituting R15 billion of this. Corporate issuance for the quarter totalled R9 billion with Super Group being the first corporate to place ZARONIA-based floaters.

Issuances for State-Owned Enterprises (SOEs) and Securitisations were R4 billion in aggregate and consisted of issuances by the Industrial Development Corporation (senior unsecured) and The Thekwini Fund 20. Issuances were largest at the 3- to 5-year tenor, with only Investec Bank issuing at tenors of 1- year and less. Primary market activity from municipalities remained absent, with the City of Johannesburg's Senior unsecured COJ08 bond suspended from trading in early April 2026, following the City's failure to publish its fiscal 2025 financial statements.

Strong investor participation characterised Q1 2026, with the supply-demand imbalance remaining pronounced across domestic debt capital markets. The average bid-to-cover ratio across all note tenors stood at approximately 3.5x, with more than 70% of notes clearing below price guidance - a clear indication of robust demand and tightening credit spreads. Investor appetite was notably stronger for shorter-dated notes, reflecting a broader preference for lower duration risk and lower investor risk appetite.

Eight auctions have already been scheduled to take place within Q2 2026 – (four corporates, two insurers, one bank and one miner, with targeted sizes of up to R13 billion), which bodes well for auction activity within the next quarter.

Notable bond maturities within Q2 2026 consist primarily of Eskom SOC Holdings’ ES26 bond, which had a redemption value of R38 billion. The bond matured in early April 2026 and was not refinanced through local debt capital markets, given the debt relief programme and associated government support. There are scheduled maturities for Banks/Financials and Corporates of approximately R21 billion and R11 billion within Q2 2026 that are not yet covered by planned auctions.

Bank/financials issuances

All “big five” banks came to market in Q1 2026, with all except Investec issuing FLAC instruments. Standard Bank was the first of the “big five” to issue FLAC in late January 2026. This was 4.66x oversubscribed and had 31 bidders, with the notes clearing at the bottom end of price guidance. Following the inaugural FLAC auction, while investor appetite remained strong, demand eased in subsequent auctions as both total bids and the number of participating bidders trended lower. The latest FirstRand FLAC auction in March 2026 attracted 19 bidders and had a subscription cover ratio of 2.1x. Since issuance, spreads on 3- to 5-year ZARONIA-linked FLAC instruments (specifically those issued by FirstRand and Standard Bank) have tightened by an average of 10 basis points (bps).

AT1 and T2 paper of R7.7 billion was issued in aggregate by Standard Bank and Absa at an average subscription cover ratio of 2.4x. Investec issued predominantly senior unsecured 1-year notes of R3.5 billion via private placement. The 1-year ZARONIA-based floaters were issued at spreads of 75bps - 82bps to their respective benchmarks.

Read: An evolution in SA's banking resolution

Source: Auction outcomes

Corporate issuances

Within March 2026, Super Group was the first corporate issuer to auction ZARONIA-based floaters. The auction was oversubscribed by 4.42x and its notes cleared 7bps - 10bps below price guidance. Bank bids were 28.21%, with banks being allocated 41.47% of total volume. Other notable issuances included Toyota Financial Services and Life Healthcare funding who each raised R1.5 billion across 3- to 5-year JIBAR-linked notes. Corporates did not issue notes with tenors exceeding 5-years. The average term premium between 3- to 5-year notes was 14bps, with Redefine having the largest term premium at 20bps followed by Redefine at 18bps (excl. Super Group as ZARONIA linked) suggesting higher term premiums for real estate.

Source: Auction outcomes

SOE and securitisation issuances

The Industrial Development Corporation raised R2.2 billion via private placement of senior unsecured paper. R1.5 billion was raised through notes with tenor between 5- to 7- years at an average spread of 173bps over 3-month JIBAR. Within February 2026, The Thekwini Fund 20 raised R1.5 billion via tap issuance, which had an average subscription cover ratio of 4.4x and cleared 5bps - 15bps below price guidance. Spreads remained unchanged for The Thekwini Fund 20 tap at quarter end.

Municipalities did not participate in local debt capital markets within Q1 2026. The City of Johannesburg's (COJ’s) senior unsecured COJ08 bond was suspended from trading in early April 2026, following the City's failure to publish its fiscal 2025 financial statements. The CoJ had indicated that the Auditor General had not yet signed off on the financial statements due to concerns over the integrity of financial reporting, but these are expected to be released by 31 May 2026.

Within the quarter, Moody’s withdrew its unsolicited ratings for the City of Ekurhuleni Metropolitan Municipality and Mangaung Municipality. GCR withdrew its unsolicited rating for the City of Tshwane Metropolitan Municipality.

Spread compression

Approximately 10% of capital raised in Q1 2026 was sourced through private placements. Over the medium term however, private placements have accounted for nearly 50% of total issuance in local debt capital markets. This elevated proportion exerts downward pressure on spreads, contributing to the price distortion in broader debt capital markets that we are currently seeing.

Source: Standard Bank Research, JSE

Below, we see the general trend of spread compression over time due to a continuation of the following additional factors: strong and growing demand for primary market issuance; the supply side not growing sufficiently to meet this demand; less attractive pick-up offered by alternatives such as government floaters; banks being aggressive bidders in certain corporate auctions; and the improving fundamental credit strength of issuers. We expect this trend to persist into the next quarter.