With issuance increasing and a downgrade to junk a looming possibility, non residents have sold a net 14.4 billion rand of the debt in August so far, according to JSE Ltd. data compiled by Bloomberg. That’s an average of 1.8 billion rand a day. The sales have wiped out inflows at a time when the country needs foreign investment to close a current-account deficit that was equivalent to 2.9% of gross domestic product in the first quarter.

The government increased the amount of local-currency debt sold at weekly auctions by 37% last week to help pay for a 128 billion-rand bailout for Eskom Holdings SOC Ltd., the state-owned electricity company. That will push up borrowing and widen the budget deficit, placing the country’s last-remaining investment-grade rating at risk. Moody’s Investors Service, which rates South Africa’s debt at Baa3, is reviewing its assessment in November.

Foreign ownership of South African government debt fell to 37.9% at the end of July, the lowest level this year, from as high as 42.8% in March 2018, according to National Treasury data. Foreigners are exiting despite yields that are among the highest in emerging markets, suggesting they’re worried a downgrade to junk would see the nation’s bonds kicked out of indexes that track investment-grade debt, such as Citigroup Inc.’s World Government Bond Index.

Though foreign ownership is already the lowest this year, the selloff has continued unabated. Inflows have turned into net outflows of 3.2 billion rand for the year in August — even at a time when a world awash with negative yields is fueling demand for riskier assets such as emerging-market debt.

In dollar terms, South African local-currency bonds have underperformed all major emerging markets in August except Argentina’s. Yields on benchmark government securities have risen 111 basis points this month, while the rand has depreciated 6.3% against the dollar, further eroding returns for foreign investors.

Yields on benchmark 2030 rand bonds climbed five basis points on Wednesday to 9.17%, near a two-month high on a closing basis. The rand weakened 1.1% to 15.3037 per dollar. DM