South Africa 10-Year Bond Yield Drops to 2015-Lows

South Africa’s 10 year government bond yield fell to 7.89%, the lowest since March 2015, after authorities signaled that public debt is set to peak this fiscal year. Finance Minister Enoch Godongwana said debt will stabilize for the first time in 17 years as the budget deficit narrows and debt service costs decline, highlighting a recent credit rating upgrade and bond market rally. The 2026 Budget Review projects the debt to GDP ratio peaking at 78.9% in 2025 to 2026, slightly above prior estimates due to weaker nominal growth and higher borrowing. Still, debt service costs are expected to rise more slowly than total spending, lowering payments as a share of revenue to 20.2% by 2028 to 2029 from 21.3% this year. Expectations that Fitch Ratings and Moody's Ratings may revise their outlooks to positive further supported demand for bonds.

South Africa’s 10-year government bond yield was slightly below 7.90%, near the lowest since March 2015, signaling investor optimism ahead of the 2026 budget. Finance Minister Enoch Godongwana is set to present the budget on Wednesday against a backdrop of strong corporate tax revenues, buoyed by rising commodity prices and higher VAT and excise duty collections. The budget is expected to be market-friendly, with a focus on fiscal consolidation, infrastructure spending, and enhanced tax enforcement to stabilize debt and support economic recovery. Early-year developments, including lower fuel costs, steady interest rates, and a constructive State of the Nation Address (SONA) by President Cyril Ramaphosa, have boosted investor sentiment and raised expectations for stronger growth in 2026. Meanwhile, renewed global trade uncertainties prompted investors to diversify their portfolios, sending additional flows into emerging markets.

South Africa’s 10-year government bond yield was around 7.92%, remaining close to the lowest since March 2015, reflecting investor optimism about the country's economic fundamentals. South Africa’s consumer inflation eased to 3.5% in January 2026, down from 3.6% in December, suggesting that inflation may have peaked and that the country could gradually move toward the new 3% target. While this opens the door for policy easing, the South African Reserve Bank (SARB) may prefer to maintain a cautious approach given an uncertain global environment and anticipated domestic price pressures. Meanwhile, the focus now turns to the upcoming Budget speech, scheduled for February 2025, in which Finance Minister Enoch Godongwana is expected to emphasize fiscal consolidation and outline measures to support growth. The 2026 Budget is anticipated to be market-friendly, with recent soaring commodity prices likely to generate a windfall from higher-than-expected tax revenues.