The Consequences Of Junk Bonds In South Africa
South Africa 's government bond yields have risen to their highest levels in almost five years as worries grow that the rating agencies could bar the country 's to junk status(-BBB) (Frankel, 2005), this is due to the ongoing drought, civil service wage increase and most of all corruption (Chand, 1999).
South Africa’s economic growth has been slowing down and yet the finance mister Pravin Gordhan reduced deficit by cutting down government which means a further GDP slowdown (Sachs, 1997). Our country is in need of strong economic growth and a way in which to create and increase international and local investments. For this reason, cutting spending to avoid being downgraded to junk status was a good decision (Onaran, 2010). …show more content…
Investment Grade these bonds are issued by low- to medium-risk lenders. A bond rating on investment-grade debt usually ranges from AAA to BBB. Investment-grade bonds might not offer huge returns, but the risk of the borrower defaulting on interest payments is much smaller (Blanco, 2005).
Junk Bonds these are the bonds that pay high yield to bondholders because the borrowers don 't have any other option. Their credit ratings are less than pristine, making it difficult for them to acquire capital at an inexpensive cost (Brewer, …show more content…
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