Locally, headline inflation rose in line with consensus to 3.5% y/y in July from 3.0% in June. Core inflation, which excludes food, petrol, and energy, increased only slightly to 3.0% y/y from 2.9% in June, reflecting that the rise was mainly driven by food and energy. August was not a meeting month for the SARB, so interest rates remained unchanged. With the SARB revising its preferred inflation target downward from 4.5% to 3.0%, however, markets continue to price in potential future rate cuts.

The yield curve was also mixed: the short-dated R2030 declined by 11bps, while the long-dated R2048 rose by 7bps. The FTSE/JSE All Bond Index (ALBI) delivered a total return of 0.7% in August, bringing the year-to-date return to 10.3%. Inflation-linked bonds outperformed nominal bonds, particularly in the 7–12-year and 12+ year sectors, with the FTSE/JSE Inflation-Linked Index (CILI) and the Government Inflation-Linked Bond Index (IGOV) recording returns of 1.46% and 1.48% respectively.

Money market returns remained under pressure in August, as short-term rates continued to trend lower. The 3-month JIBAR rate declined by 12bps to 7.01%, while the 12-month JIBAR fell by 3bps to 7.44%. Average yields on 6-month and 12-month Treasury bills also declined by 25bps to 7.39% and 16bps to 7.59%, respectively. The Alexander Forbes Short-Term Fixed Interest (STeFI) Composite Index delivered a 0.57% return for the month.

The rand continued to gain on US dollar weakness. Since the start of the year, the rand has appreciated 6.8%, driven largely by dollar depreciation. The local currency reached a high of 17.44 on August 22, its strongest level in nine months, but closed the month at 17.66 following some volatility.

Looking ahead, local economic fundamentals support a lower yield environment over the medium term. Domestic growth remains subdued, and inflation is expected to stay contained in the near term. Monetary policy is likely to remain accommodative, providing room for further downward pressure on yields. The global backdrop remains challenging, however, with ongoing geopolitical uncertainty. We continue to follow a holistic investment approach anchored in macroeconomic fundamentals and responsive to evolving policy signals.