Staff Writer
Simonis Storm Securities has reaffirmed its positive outlook on Namibian bonds, identifying those with 5- to 10-year maturities as the “sweet spot” for investors seeking yield, stability, and policy clarity.
The firm said its strongest conviction lies in government bonds maturing between 2028 and 2032 (GC28–GC32), which currently offer yields of between 8.5% and 9.3%. These bonds trade at spreads of 64 to 114 basis points over similar South African bonds.
“This segment offers the most attractive blend of carry and roll-down,” Simonis Storm said, adding that the assurance of a 6.50% repo floor through 2026 provides “clarity and reduced policy risk” for investors.
The company said it plans to maintain a structural overweight in these maturities, supported by tactical exposure to GC35 and GC37.
These offer double-digit yields and better liquidity than longer-term bonds. However, the firm said it does not favour GC48 and GC50, citing illiquidity and concentration risk, even with their higher yields of around 11.7%.
Inflation-linked bonds such as GI29 and GI36 remain part of Simonis Storm’s strategy. These currently provide a 20 to 80 basis point real yield advantage over South African equivalents.
The firm recommends an 8–10% allocation to inflation-linked bonds as protection against external price shocks and exchange rate swings.
Simonis Storm expects the Bank of Namibia to make one more rate cut in the fourth quarter of 2025, reducing the repo rate from 6.75% to 6.50%. It believes this will mark the bottom of the current rate cycle, with the rate expected to remain unchanged through 2026 to maintain stable credit conditions and preserve the peg to the rand.
“The macro environment supports such a move,” the firm said. Inflation dropped to 3.2% year-on-year in August, below the midpoint of the central bank’s 3–6% target band, with food and transport prices easing.
The firm projects inflation to average 3.8% in 2025 and remain within the target range through 2026.
In contrast, Simonis Storm remains cautious about South African bonds. It warned against long-term government bonds due to “entrenched fiscal and credit premium” and instead recommends synthetic exposure through swaps, receiving in the 10-year sector and paying in the 30-year—to benefit from expected curve-flattening.
The firm also expects the South African Reserve Bank to keep its repo rate at 7% through 2026. It said the SARB’s adoption of a new 3% medium-term anchor signals a tighter stance on inflation control, even as growth slows.
Caption
Bonds with a 5- to 10-year maturity range are attractive for investors.
- Photo: Contributed
