South Africa 10-Year Bond Yield at 2015-Lows

South Africa’s 10-year government bond yield was around 8.36%, close to the lowest since mid-June, as investors monitored fresh developments in the Middle East, while also eyeing upcoming key domestic data. The US and Iran agreed to pause hostilities and allow commercial vessels to freely pass through the Strait of Hormuz after weekend clashes threatened to derail efforts to reach a broader peace agreement. Oil prices rose again in response, but remained around pre-conflict levels, amid improved traffic in the Strait of Hormuz and hopes for a definitive resolution to the war. Domestically, attention turns to a slate of economic data releases, with the Q2 inflation expectations survey in focus for further clues on inflation dynamics and policy direction ahead of the SARB’s rate decision next month. Meanwhile, the central bank will publish its June quarterly bulletin, providing insight into South Africa's economic performance in the first quarter.

South Africa’s 10-year government bond yield eased toward 8.35%, the lowest since mid-June, as progress in US-Iran negotiations and evidence of increased shipping activity in the Strait of Hormuz helped to alleviate inflation concerns. While volatility persists, sentiment has shifted toward expectations the conflict is nearing an end as reflected in the pullback in oil prices. This has supported the domestic inflation outlook and led investors to scale back tightening bets. However, risks to the inflation outlook remain. SARB Governor Lesetja Kganyago highlighted risks extending beyond fuel costs, noting that higher fertilizer prices could spill over into food inflation during the harvest in the second half of the year. South Africa also faces potential disruption from El Niño related drought conditions. Moreover, utility tariffs including electricity, water and sanitation, refuse removal and property rates are set to increase from July 1, 2026.

South Africa’s 10-year government bond yield was around 8.51%, a near two-week high, supported by expectations of policy tightening. SARB Governor Lesetja Kganyago signalled that additional interest rate hikes may be on the horizon, as the global energy shock linked to the Middle East conflict shows signs of spreading across the broader economy. Core inflation, which excludes food and fuel, rose to 3.8% in May from 3.6%, while headline inflation accelerated to 4.5% from 4%. While the signing of the interim US-Iran agreement helped ease energy-driven inflation concerns, uncertainty persisted, with risks extending beyond fuel to food prices due to higher fertiliser costs. Kganyago noted that fertiliser price effects would be more visible in the second half of the year during the planting season, as they feed directly into food prices and may have a longer-lasting impact on inflation. Against this backdrop, traders are pricing in a higher chance of another 25bps rate hike in July.