Int. J. Sustainable Economy, Vol. 12, No. 1, 2020 81 Copyright © 2020 Inderscience Enterprises Ltd. The impact of sovereign credit rating changes on government bond yields in South Africa Misheck Mutize* and McBride M. Nkhalamba African Peer Review Mechanism, 230 15th Rd., Midrand, Johannesburg, South Africa Email: misheck.mutize@aprm-au.org Email: mcbride.nkhalamba@aprm-au.org *Corresponding author Abstract: This study applies an event study analysis on Standard & Poor’s (S&P), Fitch and Moody’s sovereign credit ratings for South Africa over the period 2007 to 2018 to investigate the impact of long-term foreign currency sovereign credit ratings changes on 30-year sovereign bond yield. Results of the analysis find a generally significant increase in bond yields before, during and after credit rating downgrades and negative outlook events. However, there was no statistically significant impact on bond yields associated with upgrades and positive outlook events. It is thus concluded that investors in South Africa’s long-term bonds are more sensitive to negative credit rating events, which are mainly driven by structural problems in the economy. This paper recommends monetary and fiscal authorities to address the concerns raised by rating agencies in review reports leading to negative outlook and downgrades before they become more apparent to trigger negative rating actions. Keywords: credit rating; bond yield; downgrades; upgrade; outlooks; South Africa. Reference to this paper should be made as follows: Mutize, M. and Nkhalamba, M.M. (2020) ‘The impact of sovereign credit rating changes on government bond yields in South Africa’, Int. J. Sustainable Economy, Vol. 12, No. 1, pp.81–100. Biographical notes: Misheck Mutize is a researcher affiliated with the University of Cape Town’s Graduate School of Business in South Africa, and holds a Doctor of Philosophy and Master of Science degrees in Finance and Investment from the same university. He has researched extensively on African governance policy, state-owned enterprises, corruption, poverty and other socio-economic development. McBride M. Nkhalamba is the Head of Research and Methodology Division in the African Peer Review Mechanism, an agency of the African Union. He has been involved, in key roles, in a number of Continental Policy and Governance Initiatives of the African Union.