Fixed Income

The ongoing conflict between the United States and Iran continued to dominate global headlines throughout April, keeping geopolitical risk firmly in focus for markets. Heightened tensions drove further volatility in oil prices, with supply disruption fears and renewed inflation concerns pushing prices above USD 100 per barrel at various points during the month, before a partial retracement on intermittent ceasefire and de-escalation signals.

Despite the elevated geopolitical backdrop, emerging markets exhibited a degree of resilience, with risk appetite holding up better than might have been expected. The conflict nonetheless continued to cloud the global growth outlook, adding a layer of uncertainty to an already complex macroeconomic environment.

The U.S. Federal Reserve, with a divided outcome kept interest rates unchanged at its April FOMC meeting. Eight members voted to hold rates steady, while four members opposed the decision for different reasons. One of the opposing members supported a 25 basis points (bps) cut, while the other three disagreed with the inclusion of an “easing bias” in the statement.

In Asia, The Bank of Japan (BOJ) kept its policy rate unchanged at its April 2026 monetary policy meeting, with the decision passed by a 6 to 3 vote, reflecting a more divided committee than markets had anticipated as three members favoured further policy tightening. The BOJ maintained a cautious tone, citing uncertainty around global growth, trade tensions and the inflation outlook.

In Europe, both the Bank of England (BOE) and European Central Bank (ECB) left policy rates unchanged. Both maintained a cautious stance with a relatively hawkish tone but broadly favoured a wait and see approach while assessing second-round inflation effects and the impact on growth.

Locally, there was no monetary policy meeting in April, however, developments surrounding elevated oil prices have driven changes in inflation expectations, with inflation now anticipated to come in higher than previously forecast. The latest available inflation print at the time of writing is the March figure, in which headline inflation edged up by just 1 basis point to 3.1% y/y, driven by fuel prices.

Core inflation, on the other hand, rose to 3.2% from 3.0% y/y, with services and rentals as the primary drivers. It is worth noting that the impact of elevated oil prices stemming from the ongoing US-Iran conflict is not yet captured in the March CPI reading.

Global sovereign bond markets delivered mixed returns in April. The US Government 10-year yield increased by 5bps, the UK by 10bps and Japan by 17bps, while France and South Africa decreased by 3bps and 38bps, respectively. The move in South African Government bonds marked a significant turnaround from the prior month.

The local government bond yield curve bull-flattened in April, with the short-dated R2030 yield declining by 15bps and the long-dated R2048 declining more significantly by 46bps. As a result, the FTSE/JSE All Bond Index (ALBI) delivered a total return of 3.27% for the month, with the 12+ year and 7–12-year segments contributing most to the positive performance.

On the money market front, markets continued to price out rate cut probabilities and price in potential rate hikes. The 3-month JIBAR rose by 3bps to 6.78%, while the 12-month JIBAR increased by 7bps to 7.80%. Treasury bill rates also edged higher, particularly in the 3-month area, rising by 14bps. The Alexander Forbes Short-Term Fixed Interest (STeFI) Composite Index delivered a return of 0.54% for the month.

The South African rand traded in a volatile range against the US dollar during April 2026, moving broadly between 16.30 and 16.98, reflecting the shift global risk sentiment. Early in the month, the currency came under pressure as a stronger US dollar and rising geopolitical tensions supported safe-haven demand, although brief relief rallies emerged on softer dollar moves and easing oil-related concerns.

Mid-month, the rand briefly strengthened, but those gains were short-lived as renewed risk-off sentiment and firmer energy prices reintroduced pressure. Overall, the month was characterised by choppy trading with a slight weakening bias, although the rand still ended firmer against the US dollar on a month-on-month basis as external factors largely drove the direction.

Looking ahead, oil price volatility and uncertainty around the ongoing Gulf conflict are the dominant drivers of global risk sentiment, feeding into inflation expectations and keeping volatility elevated across bond markets. Against this backdrop, domestic fixed income remains supported by strong carry, improved funding conditions and still-attractive real yields, which continue to anchor demand.

However, the outlook is increasingly dependent on these external shocks, particularly energy prices and US rates, which are likely to drive near-term direction.