FX.co ★ South Africa 10-Year Bond Yield Hovers Around 2020-Lows

South Africa's 10-year government bond yield has dipped below 8.30%, marking its lowest point since January 2020. This trend indicates a continued positive investor sentiment toward the country’s economic prospects. The year 2025 saw strong performance from South African assets, bolstered by improvements in fiscal health, a decline in inflation, reduced repo rates, a stronger rand, and escalated infrastructure investment. Political stability continues to be a vital component, as the functioning of the coalition government (GNU) is regarded positively, despite internal conflicts and uncertainties prior to municipal elections. In terms of data, headline inflation decreased to 3.5% in November from 3.6% in October, remaining below market expectations and aligning closer to the South African Reserve Bank's updated target of 3%. Additionally, short-term inflation expectations have dropped to unprecedented lows in the fourth quarter, opening up the possibility of rate cuts by the South African Reserve Bank this year. Economic growth is anticipated to remain modest in 2026, with projections around 1.3% to 1.4%, yet still noticeably higher compared to 2024 and 2025 levels.