FX.co ★ South African Yields Drop as Inflation Stays Tame

South Africa's 10-year government bond yield has decreased to approximately 9.8%, marking its lowest level since July 10. This decline occurs as investors evaluate the latest inflation data in conjunction with significant political and trade developments. Inflation in June rose slightly to 3% from May's 2.8%, bringing it back to the lower limit of the South African Reserve Bank's target range of 3%–6%. This scenario provides the central bank potential room for additional monetary easing. The central bank is set to convene next week, and market expectations suggest at least one more 25 basis point rate cut this year, following reductions in four of its last five meetings. Notably, this policy decision is scheduled just a day prior to the implementation of US President Trump's proposed 30% tariff on South African exports, which is anticipated to take effect on August 1. Politically, the anticipated passage of the Appropriation Bill is likely, following the Democratic Alliance's shift in stance. This change arose after President Ramaphosa fulfilled one of the party's demands by dismissing a cabinet minister involved in a misconduct scandal.