After selling a record R69.6 billion of South Africa’s recently downgraded bonds this year, foreign investors – faced with low to zero returns around the world – are rushing back to grab the high-yielding debt in the ailing economy.

In the last two weeks foreign investors have been net buyers of local bonds to the tune of more than R4 billion, after weeks of being net sellers.

This week Goldman Sachs said it was sticking to a “buy” recommendation on South Africa’s 10-year issue.

“We continue to favour longs in 10-year SAGBs on an FX-hedged basis given the attractive carry,” the US bank’s Kamakshya Trivedi said in a note.

Deutsche Bank and Bank of America also recommend the South African debt, with Deutsche Bank saying it preferred long-dated bonds due in 2035 and 2037.

“After the underperformance and a decline of 16.2 percentage points in foreign holdings since YTD, R186 (2026 bond) is also becoming a more interesting bond once again,” said Deutsche’s emerging market strategist Christian Wietoska.

Outflows in a stampede out of emerging markets has pushed foreign holdings in South Africa’s bonds to an eight-year low, as the coronavirus pandemic and the rating downgrades that followed sucked-up liquidity and spooked investors.

Foreigners held 31.5% of South Africa’s bond in May, down from 37.3% in January, according to National Treasury data.

But in the last few weeks, with the global economic recovery increasingly on the cards and the local central bank buying government bonds to ease liquidity strains, foreign investors are doing what locals have done all along.

“Look at some of the most obvious mandates, inflation plus 2% to 4%. If you’re being offered a government bond of 11% to 12% and inflation is only 3% or 4%, that’s as close to a slam-dunk as you get,” said chief executive of Canon Assets Adrian Saville.

On Friday central bank data showed the regulator had bought R10.2 billion worth of government securities in May, compared to the R20.6 billion it purchased in April, making its bond-buying scheme among the more conservative policies in emerging markets.