The Market Has Already Downgraded South Africa to Junk; Short bets against sterling rise to highest in more than two years

  • Moody’s Investors Service hasn’t said it, but investors already think it: South Africa’s credit is junk
  • South Africa isn’t benefiting from the global hunt for yield. While average local-currency yields for emerging markets have been falling, South Africa’s have been rising
  • This suggests investors are positioning for fiscal deterioration, and a credit downgrade

  • Investors have increased short bets against the pound to their highest level in more than two years
  • Sterling came under renewed pressure at the end of last week, after data released on Friday showed the UK economy contracted in the second quarter for the first time since 2012
  • The weaker-than-expected print showed economic momentum was slowing in the run-up to the end of October Brexit deadline, with Mr Johnson pledging to pull the UK out of the EU regardless of whether a deal is renegotiated