South African bond yields have fallen sharply in recent months in one of the strongest rallies seen since the end of the Covid-19 pandemic.
The 10-year South African government bond yield has fallen by 234 basis points from almost 11% in April to around 8.65% at the end of November — levels not seen since early 2021.
Bond prices move inversely to their yields.
According to the Reserve Bank’s quarterly bulletin, the decrease was driven by stable local consumer price inflation, reductions in the repo rate, a stronger rand and reduced uncertainty around international trade tariffs.
The Bank said the rally was further supported by policy rate cuts by the US Federal Reserve (Fed) and improved investor confidence after South Africa’s removal from the Financial Action Task Force (FATF) greylist, the 2025 medium-term budget policy statement (MTBPS) and the formal adoption of a new 3% inflation target.
The Reserve Bank’s monetary policy committee (MPC) reduced the repo rate by 25 basis points to 6.75% at its November meeting — the fourth cut this year — bringing the total reduction in 2025 to one percentage point.
The MPC said the risks to the growth and inflation outlook were now “balanced” and reaffirmed its commitment to the 3% inflation target announced in the MTBPS. Inflation is expected to remain within a 2–4% tolerance band, with policy directed toward maintaining the 3% anchor.
The rally reduces the government’s borrowing costs and could ease fiscal pressure, but it also reflects global investors’ renewed search for yield amid easing US policy.
Offshore appetite surges
The rally in bond yields was mirrored by a surge in trading activity and foreign demand for South African debt.
According to the Reserve Bank, foreign investors were net buyers of R71.8bn in the third quarter — the biggest quarterly inflow on record, boosted by the biggest-ever monthly net purchase in September. Cumulative net inflows reached R71.4bn in the first 11 months of 2025, compared with just R12.2bn a year earlier.
“This mainly reflects the US Fed’s decision to cut policy rates further, the shift to a preferred lower domestic inflation target of 3% announced in the 2025 MTBPS and positive investor sentiment following South Africa’s exit from the FATF greylist,” the Bank said.
Turnover in the secondary bond market of the JSE and Cape Town Stock Exchange rose 14.1% year on year to R47.2-trillion in the 11 months to November, supported by higher bond prices. Foreign participation also edged higher, averaging 10%, up from 9.1% in 2024.
The National Treasury’s net issuance of government bonds slowed slightly to R383bn in the 10 months to end-October, about 3.4% less than a year earlier. Even so, the total value of rand-denominated debt in the domestic market rose 7.1% year on year to R7.7-trillion by end-October.
The Reserve Bank’s Quarterly Bulletin mentions that the Treasury issued two new fixed-rate bonds in October. The notes mature in March 2039 and March 2042, respectively, and have lifted the nominal value of outstanding government bonds to R5.4-trillion.
In a further sign of innovation in the local debt market, Treasury raised R11.8bn in December through the country’s first Infrastructure and Development Finance Bond, aimed at funding national priority projects such as water systems, hospitals and rail lines.
The auction attracted strong demand, drawing bids of more than R26bn and achieving a 2.2-times oversubscription. Issued in two tranches — a 10-year note at 8.6% and a 15-year note at 9.13% — the bond was priced in line with the existing government curve, underscoring steady investor appetite and confidence in South Africa’s public infrastructure plans.
The improved sentiment has also carried through to global markets. In December, Treasury raised $3.5bn in a heavily oversubscribed dual-tranche Eurobond, its first international bond sale since 2024. The 12-year and 30-year tranches, priced at 6.25% and 7.375%, were both lower than the rates achieved a year earlier, reflecting stronger investor confidence and easing global borrowing costs.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.