In South Africa, as anticipated, the Reserve Bank’s (SARB) Monetary Policy Committee (MPC) unanimously cut the repo rate by 25 basis points. The decision was driven by subdued inflation readings and falling inflation expectations. The MPC also announced that while the official target range remains 3-6% as mandated by the National Treasury, the SARB has revised its preferred inflation downward from 4.5% to 3%.

South African bond yields declined over the month. The short-dated R2030 yield declined by 24 basis points, while the long-dated R2048 dropped by 37 basis points. The FTSE/JSE All Bond Index (ALBI) delivered a total return of 2.73%, bringing the year-to-date return to 9.53%.

Inflation-linked bonds delivered small positive returns over the period, with the bulk of the performance coming from the 1–3-year maturity bucket. The FTSE/JSE Inflation-Linked Index (CILI) and the Government Inflation-Linked Bond Index (IGOV) recorded returns of 0.59% and 0.52%, respectively, for the month.

Money market returns remained under pressure as short-term interest rates continued to trend lower. The 3-month JIBAR rate declined by 15 basis points while the 12-month JIBAR rates declined by 9 basis points, ending the month at 7.13% and 7.57%, respectively. Average yields on 6-month and 12-month Treasury bills also fell 8 basis points to 7.61% and 9 basis points to 7.75%, respectively. The Alexander Forbes Short-Term Fixed Interest (STeFI) Composite Index delivered a return of 0.62% for the month.

The US dollar has weakened by 10.5% since the start of the year amid market concerns that new US tariffs could weigh on domestic growth, inflation, and the broader US economy, as well as on global growth. The Rand has been broadly flat to weaker against most major currencies over the same period, except for the US dollar, against which it has gained 7.0%. This relative outperformance has been driven more by dollar weakness and changes in US trade policy than by the traditional influence of US interest rate cycles.

Looking ahead, local economic fundamentals are expected to continue supporting a lower yield environment over the medium term. Domestic growth remains subdued, and inflation is forecast to stay contained in the near term. Monetary policy is likely to remain accommodative, exerting further downward pressure on yields. The global backdrop is less favourable, however, with ongoing geopolitical uncertainties and the risk of persistent tariff disputes posing potential headwinds to the domestic outlook. We continue to monitor these developments closely and adjust portfolio positioning in line with our view.