Fixed income: The aftermath of greylisting

South Africa was placed on the Financial Action Task Force (FATF) greylist in February 2023, a signal to global markets that the country posed comparatively higher risks in areas such as anti-money laundering and counter-terrorism financing efforts.

Greylisting is considered a signal that a country is a higher risk jurisdiction when compared to another not on the greylist. To understand the potential market impact, let’s examine the experiences of Jamaica and the Philippines, which were greylisted in 2020 and 2021.

Jamaica was greylisted in February 2020 and removed in June 2024. This resulted in:

• A notable reduction in foreign direct investment (FDI)
• Higher borrowing costs for the government
• Increased costs of doing business
• A significant impact on local financial services

Similarly, the Philippines recorded:

• A 3% decline in FDI and a 2.9% drop in portfolio inflows
• Increased cost of doing business
• A marked loss in investor confidence and reputational standing

South Africa’s experience broadly mirrored these trends. After being greylisted, the country faced:

• Reduced FDI and weaker capital inflows
• Elevated borrowing costs
• Business operation hurdles
• Diminished investor confidence

It is evident from the above that being greylisted can have a negative impact on local markets. It creates distrust in a country’s financial system and this is especially felt in the local Sovereign Fixed Income markets. Since being removed from the greylist, there has been some positive outcomes for South Africa. But what does this mean for local fixed income markets?

One positive outcome following the FATF’s involvement, is the ongoing commitment by South Africa, in particular the National Prosecution Authority (NPA) and the Financial Intelligence Centre (FIC), to demonstrate effective measures to identify and prosecute financial crime. This commitment by both the NPA and the FIC and the National Treasury’s, has strengthened investor confidence in the country. The inflows into South African Government Bonds following the delisting in October 2025 are evidence of this increased investor confidence.

Since October 2025, the South African Government 10-year bond has strengthened by over 120 basis points. The South African Government bond curve has flattened by over 90 basis points. This means that long-dated government bond yields have performed relatively better than short-dated bond yields by over 90 basis points. The government bond curve flattening is a sign that investors are confident of government, and various local authorities have the resolve to govern prudently and maintain institutional discipline. South Africa’s fixed income markets are driven by inflows from offshore investors. With South Africa now delisted with strong commitments made by the various authorities, we believe that South Africa’s government bonds will attract other inflows that, due to the greylist, were forced to exit.

South Africa’s delisting is not just a technical achievement, it is a direct benefit for the fixed income markets, especially for government bond yields. Being on the greylist made it harder for South Africa and South Africans to do business internationally and increased costs for banks, businesses and the government. Now, South Africa has boosted investor confidence and is better positioned to attract FDI, ensuring that our financial system is trusted worldwide. This means more opportunities in financial markets and an opportunity for South Africa’s fixed income assets to attract more inflows.

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Momentum Asset Management (Pty) Ltd (Registration number 1987/004655/07) is an authorised financial services provider (FSP623) and part of Momentum Group Limited.