{"id":10602,"date":"2026-01-08T20:25:25","date_gmt":"2026-01-08T20:25:25","guid":{"rendered":"https:\/\/microvibenews.com\/?p=10602"},"modified":"2026-01-08T20:25:25","modified_gmt":"2026-01-08T20:25:25","slug":"what-2026-holds-for-sa-bonds","status":"publish","type":"post","link":"https:\/\/microvibenews.com\/?p=10602","title":{"rendered":"What 2026 holds for SA bonds"},"content":{"rendered":"<p><\/p>\n<div id=\"textFreeArticle\">\n<p><iframe loading=\"lazy\" src=\"https:\/\/iframe.iono.fm\/e\/1633219?layout=modern\" width=\"100%\" height=\"170\" frameborder=\"0\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>You can also listen to this podcast on iono.fm here.<\/p>\n<p><strong>JIMMY MOYAHA: <\/strong>As we wrap up the first trading week of the year I thought we\u2019d take a look at some of the outlying markets which could potentially be of interest going into 2026.<\/p>\n<p>We\u2019re going to be looking at South African government bonds. They represent quite a big portion of portfolios. Whether you\u2019re looking at retirement portfolios or looking at asset-management portfolios there is quite a big concentration of risk that sits within the bond market.<\/p>\n<p>Read:<br \/>BlackRock backs South African bonds<br \/>SA bonds rally as JPMorgan cuts index heavyweights<\/p>\n<p>I thought we\u2019d take a look at that and see what 2026\u2019s bond market could look like from an investment standpoint. I\u2019m joined on the line by the chief economist at Investec, Annabel Bishop, to see what we make of it. Annabel, compliments of the New Year to you. Always lovely having you on the show.<\/p>\n<p>Let\u2019s perhaps start with a simple understanding of why we\u2019re <em>happy<\/em> that government bond yields at this point are lower. They\u2019re potentially at the lowest levels we\u2019ve seen in more than five years since before the Covid-19 pandemic. Why is that a good thing?<\/p>\n<p><strong>ANNABEL BISHOP: <\/strong>Hi Jimmy, and happy New Year to you too. I think it\u2019s great news that we actually have the benchmark government bond yield \u2013 and indeed bond yields as well \u2013 so low because they help in terms of that being the cost of borrowing for government, and corporates have bond yields.<\/p>\n<p>Read: Foreign investors snap up SA\u2019s\u00a0bonds in yield search<\/p>\n<p>But you are referring to government bonds. If you look at the benchmark bond below 8.5% and of course close to 8%, that\u2019s the yield on the bond, how much government would have to pay in terms of borrowing from the individual.<\/p>\n<p>So when your yield is a 12% it\u2019s much more expensive to borrow than when it is at 8%, for example.<\/p>\n<p><strong>JIMMY MOYAHA: <\/strong>You mentioned that 12%, Annabel. I can\u2019t help but notice that that was as recently as just before the 2024 election, so it wasn\u2019t that long ago that South Africa\u2019s government bonds were exceptionally expensive \u2013 at least for the South African government.<\/p>\n<p><strong>JIMMY MOYAHA: <\/strong>We\u2019ve seen that a lot has changed since our own elections. We\u2019ve seen that the government of national unity, the GNU \u2013 where many have thought it would have failed and fallen apart at this point \u2013 has managed to get us through a full calendar year and is looking poised to continue with the momentum it has been able to build. Has that been something that investors have been looking toward in terms of security?<\/p>\n<p>Read: GNU unlikely to last, DA\u2019s Zille says<\/p>\n<p>We know that the South African market historically has always been driven by a bit of political uncertainty, which weighs in on investor sentiment.<\/p>\n<p><strong>ANNABEL BISHOP: <\/strong>Yes, Jimmy. I think that\u2019s exactly the point. The benchmark bond yields that you\u2019re talking about rose to 12.23% ahead of the elections in 2024. That\u2019s of course, our national elections, and the biggest driver then was political risk. But there was concern that there would be a sharp deterioration in state finances if there was a left-leaning coalition.<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n<p>That dissipated on the formation of the GNU. It didn\u2019t immediately fall away, but it dissipated over the course of last year as the GNU proved they could work together, as you said.<\/p>\n<p>Read:<br \/>South African coalition leaders pledge to accelerate reforms<br \/>South African bonds lure foreign investors with top EM returns<\/p>\n<p>And then, of course, over the course of this year as well, with the opposition being able to stand up and say \u2018no\u2019 to increased expenditure and actually having a robust coalition, a robust government of national unity, that resulted instead in positive investor sentiment, as you said \u2013 fiscal consolidation.<\/p>\n<p>We\u2019ve also, of course, had SA off the grey list, let\u2019s not forget. We\u2019ve had a credit-rating update upgrade as well. All of these things are really positive to investor sentiment.<\/p>\n<blockquote>\n<p>But key in terms of driving South Africa\u2019s bond yields over the period has been expectations of US interest rate cuts.<\/p>\n<\/blockquote>\n<p>The manifestation of these interest rate cuts in turn has increased risk-taking in global financial markets. That in turn has also benefitted South African bonds, emerging market portfolio assets and assets in general. So there has been a lot going for our bond market.<\/p>\n<p>Read:<br \/>South Africa inflation expectations eased with 3% target, Sarb says<br \/>Lower inflation target set to reshape rand\u2019s long-term path<br \/>Inflation dip strengthens case for January rate cut<\/p>\n<p>Let\u2019s not forget, Jimmy, lower inflation as well. And of course a lower inflation target and interest rate cuts. So many factors. One almost doesn\u2019t remember all of them in one go.<\/p>\n<p><strong>JIMMY MOYAHA: <\/strong>And they all came through in one calendar year. I think what markets also needed to take stock of is a lot of positive surprises coming through to benefit the South African story.<\/p>\n<p>Annabel, you touched on the US interest rate expectations, and I want to get your thoughts on the international markets. We know that for foreign direct investments, things like bond yields form a very important barometer to be able to measure the risk associated with investing in a country like South Africa as an emerging market country.<\/p>\n<p>Given that such a large percentage of our bonds are foreign-owned as well, the countries varying anywhere from the US to Europe, anywhere in the world, what does that kind of foreign direct investment look at when wanting to see whether or not these yields are attractive enough?<\/p>\n<p><strong>ANNABEL BISHOP: <\/strong>If we actually look at this component you mentioned, foreign purchases of South African bonds, we actually saw R83.6\u00a0billion last year. That\u2019s a little data from Bloomberg highlighting the improvement in investor sentiment, as you note.<\/p>\n<p>But the net purchases really only happened in the last three quarters of the year, and in fact they really rose significantly in the second half of the year. So you\u2019ve seen a switch in investor sentiment in the second half of last year \u2013 and of course that\u2019s important.<\/p>\n<blockquote>\n<p>In general, foreigners have been quite interested in South African assets, portfolio assets, bonds or equities, gaining as well.<\/p>\n<\/blockquote>\n<p>We\u2019ve seen a good flush.<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT:<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n<p>Remember our largest export category is precious metals, which includes gold, platinum, also of course precious stones. We\u2019ve seen their big run and really a huge run in gold prices. In fact it\u2019s been a long-term phenomenon, the increase in the gold price. But it has really accelerated in the last couple of years \u2013 and of course most recently platinum prices as well.<\/p>\n<p>Read:<br \/>Gold, silver jump as Venezuela tensions add to geopolitical risk<br \/>Are we in the early or late stages of a precious metals supercycle?<\/p>\n<p>There has obviously been this move away from I think the stringency if people were looking at nationally defined contributions towards reducing the impact of climate change, reducing emissions under the Paris Agreement and, of course, the US potentially exiting that.<\/p>\n<p>There has been much greater production of fossil-fuel motor vehicles than would have been expected. And of course, from an EV perspective, one would have thought you would have moved away from that. So there has actually been a lot of support from the platinum press as well.<\/p>\n<p>But that precious metal rally is also expected to improve our government finances \u2013 again in contributing to government bonds, in aiding foreign investor sentiment. South Africa is known to be a gold exporter, and I think all of these factors are coalescing for South Africa to benefit significantly.<\/p>\n<p><strong>JIMMY MOYAHA: <\/strong>Speaking of benefitting, Annabel, I want to get your thoughts around what 2026 could hold, because some of the factors that you\u2019ve outlined alongside factors like the inflation-targeting confirmation coming out of National Treasury towards the tail end of last year \u2013 some of those factors haven\u2019t fully felt their way into the market.<\/p>\n<p>At the start of this year, of course, we know that next month we\u2019re heading into our main budget speech. That\u2019s going to be the talk of the town.<\/p>\n<p>Read: South Africa joins bond rush with new dollar-debt offering<\/p>\n<p>But I want to get your thoughts on how the 2026 year is kind of positioning itself from a bond perspective, especially when we look at South African bonds and their potential attractiveness. That 8.3%, 8.5% \u2013 still quite the numbers what we are happy with.<\/p>\n<p>But with the positive momentum that sits within the South African story at the moment, is it too much to venture into perhaps breaching that 8% barrier?<\/p>\n<p><strong>ANNABEL BISHOP: <\/strong>Yes, I think a good point \u2013 and of course, if we have a look at our bond yield strengthened by 186 basis points last year, compared to only 82 basis points over 2024. So it\u2019s been that acceleration over the course of last year that we mentioned and early this year.<\/p>\n<blockquote>\n<p>In fact, if we have a look in general, there has been an acceleration for South Africa early this year in terms of rand strength and other financial market indicators.<\/p>\n<\/blockquote>\n<p>But if you look, previously to that we saw sell-offs in 2022 and 2023, and also of course lower yields.<\/p>\n<p>So really this big run-up in bond yields over I think more \u2013 maybe 170 basis points, 150 basis points over the last couple of years \u2013 we wouldn\u2019t expect that 260 basis points to replicate again. So we wouldn\u2019t say we are now at 2% and we\u2019re going to get to 6%, for example; or even lower than that. But I think breaching the 8% yield barrier is a possibility because you\u2019ve seen so much positive sentiment.<\/p>\n<p>Read:<br \/>Sub-Saharan Africa set to outpace global growth<br \/>Inflation expectations fall toward 3% target<br \/>Consumer confidence rises in Q4<\/p>\n<p>What I mean by the 6% is that when our government did ratios, we were looking at borrowings of just above 20% to GDP. Now it\u2019s closer to 80%. Of course that is not reflective of the tough environment we are in. A 6% bond yield would not be one where your borrowing trajectory is out at 80%.<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT:<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/p><\/div>\n<\/div>\n<p>You talked about what can we look for in 2026. Really, in this type of environment that we\u2019re sitting in we have a lot of positive factors that are fed through; a huge number of positive factors have been fed through, but unfortunately we are still seeing some strain on government finances.<\/p>\n<p>By that, if we have a look at the very latest data from National Treasury, the first eight months of the 2025\/26 year show expenditure running at 63% versus 64% last year. But that\u2019s because of the delay in budget. Of course, if we then have a look at the revenue, the revenue collection is at 59.7[%] versus 64[%] a year ago. So it\u2019s not doing so well.<\/p>\n<p>Now, what this translates into is that the deficit is already 80% of the budget, but we\u2019re only at two-thirds of the year.<\/p>\n<blockquote>\n<p>So you can see that it looks like there is going to be a bit of strain on the fiscal deficit, which in turn might result in an increase in borrowing. That\u2019s the risk for our bond rally that we\u2019re seeing.<\/p>\n<\/blockquote>\n<p>Now, of course, we might see a big jump in the last few months of the year, and that\u2019s four months remaining for government finance statistics. We might see quite a bit more coming through in terms of revenue. And if that does come through then it will obviously lower the problem.<\/p>\n<p>Listen: Financial market outlook for 2026: Cautiously optimistic about SA<\/p>\n<p>Government has also said it might have to increase taxes if we do see an overrun in terms of the deficit. So there are some risks, but there\u2019s also positivity. And I think if we look forward, obviously there\u2019s even a possibility of a further credit-rating upgrade coming through from Fitch, which is now one tier below S&amp;P and Moody\u2019s.<\/p>\n<p>So overall I think we would not expect to see the same degree of phenomenal bond strength from where we are.<\/p>\n<p>Certainly in the course of this year we might see a bit more; we might move to 8% and might even dip below that. But we would need further substantial positive outcomes to see a real big increase down towards a 6% mark, and that\u2019s going to take a reduction in supply.<\/p>\n<p>Read:<br \/>Godongwana hits out at credit rating \u2018bias\u2019 as upgrade awaited<br \/>IMF impressed with SA inflation target and removal from grey list, but \u2026<br \/>SA takes global stage as credit upgrade confirms reform momentum<br \/>South Africa\u2019s ratings upgraded by S&amp;P Global<\/p>\n<p>In the 2000s, we actually saw debt buybacks that reduced the supply of bonds. And of course bond supply does have a big impact on yield.<\/p>\n<p><strong>JIMMY MOYAHA: <\/strong>Markets continue to weigh up the investment risk associated with South Africa, as reflected in the performance of South Africa\u2019s bonds. It\u2019s certainly shaping up to be an interesting 2026.<\/p>\n<p>With all of the factors to consider, there is still quite a positive momentum for the South African story, and hopefully that is reflected in the bond markets in the future.<\/p>\n<p>We\u2019ll leave the conversation on that note. Thanks so much to the chief economist at Investec, Annabel Bishop, for joining us to take a look at South African government bonds and what 2026 year could hold for them.<\/p>\n<p><em>Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n<p><script data-cfasync=\"false\">\n            !function(f,b,e,v,n,t,s)\n            {if(f.fbq)return;n=f.fbq=function(){n.callMethod?\n                n.callMethod.apply(n,arguments):n.queue.push(arguments)};\n                if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0';\n                n.queue=[];t=b.createElement(e);t.async=!0;\n                t.src=v;s=b.getElementsByTagName(e)[0];\n                s.parentNode.insertBefore(t,s)}(window, document,'script',\n                'https:\/\/connect.facebook.net\/en_US\/fbevents.js');\n            fbq('init', '779812924991616');\n            fbq('track', 'PageView');\n        <\/script>#holds #bonds<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You can also listen to this po&hellip; <\/p>\n","protected":false},"author":1,"featured_media":10603,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[113,1552],"_links":{"self":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/10602"}],"collection":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10602"}],"version-history":[{"count":0,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/10602\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/media\/10603"}],"wp:attachment":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10602"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10602"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10602"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}