FX.co ★ South Africa 10-Year Bond Yield Hit 2019-Lows

South Africa's 10-year government bond yield has declined to approximately 8.15%, nearing its lowest level since September 2019. This shift reflects investor anticipation of a potential interest rate cut by the South African Reserve Bank (SARB) at their meeting on January 29. Many economists are predicting further monetary easing throughout the year, with expectations of at least a 50 basis point reduction projected for 2026, although opinions vary regarding the timing. The central bank recommenced its rate-cutting measures in November, reducing borrowing rates by 25 basis points to 6.75%. This decision was supported by a favorable inflation outlook, strengthening of the rand, and lower oil prices. Further bolstering investor confidence, short-term inflation expectations hit record lows in the fourth quarter, aligning with the SARB's objective to stabilize consumer price growth at 3%. With December's headline Consumer Price Index reaching 3.6%, it remains close to this target. SARB Governor Lesetja Kganyago has emphasized a cautious stance, leaving some uncertainty about any immediate moves. Concurrently, a reduction in geopolitical tensions has contributed to decreased debt costs.