The US-Iran conflict de-escalated during June as both sides moved toward a fragile ceasefire. The Islamabad Memorandum of Understanding, signed on 17 June 2026, established a framework for negotiations covering sanctions, nuclear issues and regional security. While the agreement reduced immediate geopolitical risks, uncertainty surrounding the future security of the Strait of Hormuz remains a potential threat to global energy markets.

Oil prices responded positively to the improving outlook. Brent crude, which briefly approached USD120 per barrel during the conflict, fell sharply as fears of supply disruptions eased and shipping activity normalised. By month-end, oil had declined to the mid-USD70s per barrel, providing relief for inflation expectations and global markets.

Major central banks maintained a cautious stance. The European Central Bank (ECB) and Bank of Japan (BoJ) raised interest rates, while the US Federal Reserve (Fed) and Bank of England (BoE) kept rates unchanged but signalled that inflation risks remain elevated. As a result, expectations for near-term policy easing remain limited.

Locally, headline inflation rose to 4.5% year-on-year in May from 4.0% previously, driven mainly by higher fuel prices. Food inflation moderated, helping to offset some of the pressure, while core inflation edged higher.

South African bonds performed well despite global uncertainty. Falling local bond yields reflected improving investor sentiment and continued demand for domestic fixed income assets. The FTSE/JSE All Bond Index (ALBI) returned 1.55% for June, taking its year-to-date gain to 4.25%. The rand weakened modestly against the US dollar but remained relatively resilient.

Although geopolitical tensions have moderated, risks associated with energy markets, inflation and the path of global interest rates remain. South African bonds continue to offer attractive real yields and compelling valuations, providing investors with a combination of income, diversification and potential capital appreciation.

The Cadiz Money Market Fund continued to fulfil its mandate and delivered competitive returns during June. Short-term interest rates trended lower as market participants scaled back expectations of further repurchase rate hikes following the recovery in oil prices and the easing of inflation concerns. The Fund remains strategically positioned within the short-term investment universe, with a targeted allocation to high-quality corporate credit aimed at enhancing yield while maintaining full compliance with mandate guidelines and avoiding unnecessary risk. This disciplined approach has enabled the Fund to continue outperforming its benchmark, the Alexander Forbes Short Term Fixed Interest (STeFI) Composite.

The Fund’s forward yield stands at 7.71%, reflecting its attractive risk-adjusted profile and its ability to generate steady income in a moderating interest rate environment.

The Cadiz Enhanced Income Fund’s performance during June was driven primarily by its exposure to nominal bonds, inflation-linked bonds and corporate credit. Government bond yields declined as geopolitical tensions eased, supporting positive returns from the Fund’s nominal bond holdings. Strong investor demand for corporate debt also contributed positively to performance, while inflation-linked bonds benefited from a rise in inflation expectations. Trading activity during the month was largely driven by cash flows, portfolio positioning and the reinvestment of maturing instruments. The Fund remains well positioned to capitalise on opportunities across both the corporate and government bond markets while maintaining its focus on delivering attractive risk-adjusted returns.

The forward yield of the Fund is 8.29%, with a marginally longer effective duration of 0.69 at quarter end.

The Cadiz Absolute Yield Fund’s performance in June was underpinned by its allocations to nominal bonds, inflation-linked bonds and corporate credit. An increased exposure to bonds contributed positively to returns as yields declined during the month, resulting in higher bond valuations. Trading activity focused on deploying available cash, rebalancing the portfolio and reinvesting proceeds from maturing instruments. The Fund remains actively managed, with a focus on capturing opportunities across markets while maintaining a disciplined approach to risk management.

The forward yield of the Fund is 8.28% while duration was lengthened to 1.96 at quarter end.

The Cadiz Bond Fund delivered another positive return in June supported by declining bond yields. Performance was driven primarily by the medium- and long-term segments of the yield curve, which made a strong contribution to overall returns. The FTSE/JSE All Bond Index (ALBI) returned 1.55% for the month and 21.48% over the trailing 12-month period. The Fund continues to deliver returns in line with its mandate and remains strategically positioned to capitalise on opportunities across the yield curve while maintaining a disciplined approach to portfolio construction.

The forward yield of the Fund is 8.67% while duration was lengthened to 6.34 at quarter end.