As an investor one is always in search of assets that are both priced attractively but also have positive fundamentals underpinning them. These are hard to find! Typically, you have to either compromise on the price or on how good the “story” is. South African government bonds provide an interesting example of this investment dilemma. Prior to the recent elections, the fundamental backdrop was very concerning, with investors having to contend with fiscal weakness, a poor growth outlook, and a highly uncertain election outcome. At that point, however, this backdrop at least came with a very attractive valuation, with the 10-year bond yield exceeding 12%, which was higher than where it reached during both “Nenegate” and the Global Financial Crisis.

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