Q2 sees issuance revival and first ZARONIA-linked deals

South Africa’s Debt Capital Market rebounded in Q2 2025, with issuance rising to R39.5 billion amid strong demand and spread compression. Banks, corporates, and REITs led activity, while auctions remained well supported. Secondary market volumes declined as tighter spreads dampened trading appetite.

Primary market overview

The Debt Capital Market (DCM) bounced back in the second quarter, with total issuances of R39.5 billion from R26.6 billion in the first quarter. Banks and financial services led this growth, increasing their issuance from R14.1 billion to R21.1 billion. Corporate issuances also surged, climbing from R6.7 billion to R16.1 billion. Meanwhile, municipalities continued their absence from the DCM. Market volatility following the Liberation Day tariff announcements led issuers to favour private placements over market auctions. 

Bank issuance and spreads 

All the “big five” banks, Absa Bank Limited (Absa), FirstRand Bank Limited (Firstrand), Nedbank Limited (Nedbank), The Standard Bank of South Africa Limited (SBSA) and Investec Bank Limited (Investec), issued senior paper totalling R7.9 billion during the quarter. Demand remained resilient, evidenced by auction oversubscription rates consistently exceeding 2x.

Since the last senior issuance in Q1, the spread on the 3-year floating rate note compressed by one basis point (bps) to 85bps over 3-month JIBAR, while the 5-year note’s spread remained flat. In contrast, the 7-year note spread widened by 4bps to 115bps over 3-month JIBAR; our view is that this reflects a movement toward the higher spread of the newly issued 7-year government floating rate note (RN2032), which was first issued in April at 147bps over 3-month JIBAR. The RN2032’s spread also compressed over the quarter, clearing at 134bps over 3-month JIBAR in the June issuance.

Additionally, Absa and SBSA privately placed their first senior notes linked to the ZARONIA rate, issuing in aggregate R0.25 billion in 3-year notes at 102bps over ZARONIA. Firstrand, Nedbank and SBSA issued R12.1 billion in subordinated debt instruments (AT1 and Tier 2) during the quarter.   

Non-bank financial issuance

In the non-bank financial sector, Discovery Limited (Discovery) raised R1.5 billion via auction across 6-month and 1-year commercial paper, achieving a subscription ratio of 1.9x. Old Mutual Life Assurance Company South Africa Limited (OMLACSA) raised R1.2 billion in a 5-year subordinated debt capital instrument via auction, clearing at 124bps over 3-month JIBAR – 1bp below the lower end of price guidance. Demand was similarly strong, with spreads compressing by 6bps compared to OMLACSA’s November 2024 issuance.  

Corporate issuers: Mining, autos and telecoms

Corporate issuance was led by the mining and real estate investment trust (REIT) sectors, which raised R5.7 billion and R6.0 billion, respectively. The auto sector also returned to the market, marked by a second-quarter issuance from Daimler Truck Southern Africa. 

Northam Platinum privately placed R5.7 billion across the 3-, 4-, and 5-year notes. The 3- and 5-year tranches each amounted to R2.5 billion, supporting a staggered maturity profile. This follows the company’s May 2023 issuance, when it raised R2.2 billion across 3-, and 5-year notes. Since then, spreads compressed by 85bps and 80bps for the 3-year and 5-year notes respectively, clearing at 215 bps and 295 bps over 3-month JIBAR. The newly introduced 4-year note was issued at a spread of 255bps over 3-month JIBAR.

The MTN Group continued to be the most prominent mobile network operator in the DCM. Its public auction was well supported, receiving R3.6 billion in bids, with R1.7 billion allocated. The spreads on its 5- and 7-year notes compressed by 7bps and 10bps respectively, compared to the October 2024 issuance, clearing at 148bps and 170bps over 3-month JIBAR.  

REIT sector activity

Growthpoint, Emira, Fortress, and Resilient REIT returned to the market to raise term funding.

• Growthpoint raised R1.3 billion via private placement with a 5-year note at 120bps over 3-month JIBAR.

• Emira issued a 3-year note of R90 million via private placement at 155bps.

• Fortress Real Estate held a public auction, raising R820 million across 3- and 5-year notes, which cleared at 119bps and 134bps, respectively.

• Resilient REIT issued a single 5-year note via auction, raising R750 million at 130bps.

• Equites was the largest REIT issuer of the quarter, raising R1.2 billion via a 1-year privately placed note at 83bps over 3-month JIBAR.

Largest corporate issuers

Daimler Trucks was the largest corporate issuer of the quarter, raising R1.48 billion through a well-supported public auction. The auction attracted 21 bidders, with allocations made to 15. Banks were particularly active, accounting for 31% of bids and receiving 41% of the final allocation. The 1- and 3-year notes cleared at 52bps and 78bps over 3-month JIBAR, respectively.

Woolworths raised R1 billion through private placements across a 3-year note at 105bps and a 5-year note at 120bps over 3-month JIBAR.

Healthcare and SOE issuance

In the healthcare sector, Clindeb Investments Limited was the sole issuer, privately placing R1.0 billion in a 5-year note at 125bps over 3-month JIBAR – 2bps tighter than its previous issuance.

Among state-owned enterprises (SOEs), only the Industrial Development Corporation (IDC) and Transnet came to market. The IDC privately placed R1.4 billion in senior unsecured bonds across 5- and 7-year maturities, clearing at 185bps and 200bps over 3-month JIBAR – consistent with pricing from its inaugural sustainability bond auction in March.

Transnet issued R480 million in 12-month unguaranteed commercial paper (CP), priced at an implied yield of 8.50% over the 12-month JIBAR reference rate, tighter than the 8.85% implied yield on its February 2025 zero-coupon CP.

Market dynamics and investor demand

The second quarter continued the trend of auction oversubscription and spread compression, signalling persistent strong demand for primary market issuance.

Secondary market

Mirroring developments in the primary market, average spreads in the secondary market compressed across most sectors during Q2 2025 and over the past twelve months. In our view, tighter spreads continue to dampen investor appetite in the secondary market, with year-to-date trading volumes trailing those of the same period last year.