South African FLAC demand weakens as issuance strains investor capacity, Futuregrowth says
TLT•South African FLAC issuance reached about R52 billion through October 2026, roughly R8 billion more than senior unsecured redemptions. Demand weakened in September as auction participation fell, spreads widened by an average of 5 basis points and subscription cover dropped to 1.0–1.1 times.
1. Issuance strains demand
South African First Loss After Capital (FLAC) issuance reached approximately R52 billion through October 2026, exceeding senior unsecured redemptions by about R8 billion. Demand weakened in September, with auction participation declining as investors struggled to absorb issuance at prevailing pricing; clearing spreads widened by an average of 5 basis points across tenors, and subscription cover ratios fell to 1.0–1.1 times.
2. Banks face funding needs
Banks face an estimated R360 billion baseline minimum FLAC requirement over six years, alongside refinancing debt callable or maturing before December 31, 2031. Regulatory investment limits may constrain the investor base and raise the risk of higher, less predictable funding costs for banks.
