From Bloomberg

South Africa’s credit risk is rising relative to emerging-market peers on investor concern the nation may get downgraded as economic growth sputters and borrowing costs increase.

Investors are paying 1.05 percentage points more to insure the country’s debt against non-payment for five years using credit default swaps than for similarly rated Mexico, up 35 basis points in the fourth quarter, data compiled by Bloomberg show. South Africa’s default swaps are the fourth-highest among 25 emerging and major markets monitored by Bloomberg.

Bond yields have jumped since May, when the Federal Reserve first said it may reduce monetary stimulus, boosting borrowing costs at a time when South African Finance Minister Pravin Gordhan is struggling to contain the budget deficit in the face of slumping tax revenue. Moody’s Investors Service and Standard & Poor’s have a negative outlook on the nation’s debt.

“That risk of a credit downgrade is still there,” Asher Lipson, a fixed-income strategist at Standard Bank Group Ltd. in Johannesburg, said by phone yesterday. “There is also concern that tapering will trigger more general worries.”

The Fed may begin reducing its $85 billion monthly bond-buying program after a two-day meeting which ends today, according to 34 percent of economists in a Dec. 6 Bloomberg survey, up from 17 percent in a Nov. 8 poll.

Rand Plunge

South Africa has been rocked by strikes since last year that have shut mines and car plants, undermining growth in an economy that’s set to expand at its slowest pace since the 2009 recession. The rand’s 18 percent plunge against the dollar this year, the worst out of 16 major currencies tracked by Bloomberg, is threatening to fuel inflation, reducing the central bank’s room to stimulate the economy.

Written by Robert Brand | Read more at Bloomberg