Municipalities have been conspicuously absent from the debt capital market for the past three years as Transnet shot the lights out in the debt capital market in the quarter to December 2025 with its November auction.
Transnet’s November auction of government-guaranteed paper was well supported and attracted record volumes, with R42 billion in bid volume across 44 bidders. It was over eight times (8x) oversubscribed and saw significant spread compression. This was a strong indicator of investor demand in South Africa’s listed credit market, Futuregrowth Asset Management said in the 4th quarter Listed Credit Report for 2025.
Futuregrowth Investment analyst Kabir Bedasie and head of Listed Credit Wafeeqah Lagerdien said the Transnet auction was the most noteworthy in a quarter with issuance rising to R50 billion, slightly less than the R53 billion in the third quarter, amid strong demand and spread compression.
They said the trend of auction oversubscription and spread compression continued due to consistency in strong and growing demand for primary market issuance, the supply side not growing sufficiently to meet this demand, less attractive pickup offered by alternatives such as government floaters, banks being aggressive bidders in certain corporate auctions and the improving fundamental credit strength of issuers.
“In line with the trend over the year, banks and financial services dominated the quarter’s issuance at R22 billion, followed by corporates at R13 billion, state-owned enterprises (SOEs) at R12 billion and securitisations at R4 billion. For the third consecutive year, municipalities remained absent from the debt capital market,” the analysts said.
Futuregrowth said beyond Transnet, the quarter was characterised by persistent oversubscription and spread compression across banks, corporates, REITs and other SOEs, reflecting both constrained supply and improving issuer fundamentals.
In the quarter, Development Bank of Southern Africa (DBSA) and Industrial Development Corporation of South Africa Limited (IDC) raised R6.9bn of debt through a mix of three auctions and private placements.
“As a reflection of demand, the notes issued via auction were on average 3x oversubscribed,” Futuregrowth said.
All the big five banks – Absa, Nedbank, FirstRand, Standard Bank, Investec, came to market in the last quarter of the year, issuing a combination of senior and subordinated debt instruments. Investec raised R3.1bn of senior and AT1 debt via private placement. Nedbank was the only other bank to issue via private placement in the quarter, raising R2.5bn of Tier 2 debt. All other bank issuances occurred via auction. Demand remained resilient, evidenced by auction oversubscription rates consistently around 2x. Since the last senior issuance in the third quarter, the issue spread on the 3-year floating rate note (FRN) compressed by 3 basis points (bps) to 79bps over 3-month JIBAR; the 5-year note issue spread compressed by 5bps to 93bps; and the 7-year note issue spread compressed by 8bps to 102bps.
In the non-bank financial sector, Liberty Group and Santam issued subordinated debt via auction. Strong demand was reflected in subscription ratios over 2x. Liberty was the last insurer of the year to issue 5-year subordinated debt which cleared at 118bps over 3-month JIBAR: this reflected a 6bps compression since the year’s first issuance of 5-year subordinated debt in the second quarter
On corporate issuers, Pepkor Holdings, Woolworths Holdings and MTN Holdings placed R3.6bn of debt via private placement during the quarter. Bidvestco Limited, Daimler Truck Southern Africa, MTN Holdings and Toyota Financial Services (SA) Limited raised R7.4bn of debt via auction
“Similarly to banks, auctions were oversubscribed by over 1.8x on average,” Futuregrowth noted.
Daimler’s 3-year note cleared at 75bps over 3-month JIBAR – 3bps tighter than its June issuance. Toyota’s issue spreads tightened from its July issuance, tightening by 3bps and 1bps across the 3- and 5-year tenors; and the 3- and 5-year notes cleared at 74bps and 93bps over 3-month JIBAR, respectively. The issue spreads across MTN’s notes also tightened since its earlier issuance in the year, with compression of 8bps, 3bps and 12bps across the 3-, 5- and 7-year tenors, respectively.
In the Real Estate Investment Trust (REIT) sector, Octodec Investments privately placed R0.2 billion via a 3-year FRN at 175bps over 3-month JIBAR. This was 15bps tighter than its February issuance. Equites Property Fund Limited raised R0.5bn through the issuance of a 5-year FRN via auction. The auction was 4.3x oversubscribed and the note cleared at 108bps over 3-month JIBAR. Resilient REIT Limited issued 3- and 5-year FRNs via auction, where the notes were oversubscribed by 7.7x and 4.0x, respectively. The 3- and 5- year notes cleared at 110bps and 120bps, respectively.
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