Holders of Sovereign bonds

An analysis of the holders of government bonds is made looking at the two biggest countries measured by the value of bonds outstanding. Egypt and South Africa make up 63% of the value of bonds outstanding on the continent. Both local and foreign investors are holders of government bonds in both countries.

In South Africa, foreign investors hold 38% of sovereign bonds, and local investors hold the majority at 62%. In Egypt, the picture is slightly different; foreign investors own 20% of the bonds and bills on a weighted average basis, and domestic investors own 80%. In Egypt, foreign investors hold more treasury bills compared to bonds at a split of 26% in bills and 3% in bonds. The discrepancy in foreign holdings between the two countries is in part due to South Africa’s inclusion into the WGBI.

In terms of domestic investors, banks are a significant player in the bond market. In Egypt, banks hold a majority of the bonds at 62%, while in South Africa banks hold 17%. Private self-administered funds and pension funds hold 25% of the bonds in South Africa and 6% in Egypt. In Egypt, pension funds regulation stipulates that a minimum of 15% of assets must be invested in government bonds, bills and notes while South African pension funds can invest a maximum of 100% of assets in government debt instruments. Egypt is below the 15% requirement due to the smaller size of assets, which OECD reports at USD 3.7bn. Insurance companies in both countries hold a tiny portion of bonds, and this is more so in Egypt than in South Africa. Insurance companies hold 7% and 1% of the bonds in South Africa and Egypt, respectively. The reason for Egypt’s smallholding could be due to the smaller size of the insurance market in that country relative to South Africa.