FX.co ★ South Africa 10-Year Bond Yield Up, Still Near 2020-Lows

South Africa's 10-year government bond yield has slightly increased, approaching 8.40%, yet it remains near the lows last seen in January 2020. This stability is attributed to robust foreign investment flows. In recent months, investor confidence has been buoyed by stronger governance, improved fiscal health, enhanced political stability, and a credible monetary policy framework. The South African Reserve Bank (SARB) has played a key role in this confidence by steadfastly prioritizing price stability, thereby anchoring inflation expectations and reducing the previously higher risk premium associated with local assets. Importantly, policymakers lowered the inflation target last year, reinforcing the expectation that South Africa will maintain its interest-rate edge over the United States. With the policy rate at 6.75% and inflation projected to be around 3.6%, real interest rates are holding above 3%, making South African bonds appealing to investors seeking yields. Additionally, market optimism has been encouraged by the government's initiatives to stimulate economic growth, which has averaged below 1% over the past decade.