Several central banks in advanced economies convened for monetary policy meetings in September. In the United States, the Federal Reserve lowered its policy rate by 25 basis points, aligning with market expectations. The move reflected mounting concerns about labour market conditions, following a weaker-than-expected jobs report that pointed to softer hiring demand and a modest rise in the unemployment rate. Elsewhere, major central banks adopted a more cautious tone. The European Central Bank kept interest rates steady but reiterated its commitment to maintaining restrictive policy settings until inflation shows clearer signs of returning to target. The Bank of England also held rates unchanged, balancing persistent services inflation against slowing economic activity. Collectively, the September meetings highlighted a shift among advanced economy central banks toward a more data-dependent and balanced policy stance.

Locally, the release of second-quarter 2025 GDP and August CPI figures provided fresh insights into South Africa’s economic performance. According to Statistics South Africa, the economy expanded by 0.8% quarter-on-quarter in the second quarter, exceeding market expectations of 0.6%. Growth was supported by resilient household consumption, which rose by 0.8% q/q. This represents an improvement from the 0.5% recorded in the previous quarter. Encouragingly, private sector investment also rebounded strongly, increasing by 5.6% q/q in Q2 2025 after the sharp contraction recorded in the first quarter.

On the inflation front, headline consumer inflation surprised to the downside in August, easing to 3.3% year-on-year from 3.5% in July and below market expectations of 3.6%. The moderation was largely driven by softer food price inflation, lower fuel and gas costs, and a slowdown in electricity price increases. However, core inflation edged slightly higher to 3.1% y/y, suggesting that underlying price pressures remain contained but stable.

At its September meeting, the South African Reserve Bank’s Monetary Policy Committee (MPC) voted 4–2 to keep the policy rate unchanged at 7.0%. Two members favoured a 25-basis point cut, reflecting growing divergence within the committee over the appropriate timing for policy easing.

Bond yields declined across most developed markets in September. In the United States, the yield on the benchmark 10-year Treasury fell by 8 basis points to end the month at 4.15%. In Europe, 10-year government bond yields eased slightly, declining by 1 basis point in Germany to 2.71% and by 2 basis points in the United Kingdom to 4.70%. In contrast, France’s 10-year yield edged up by 2 basis points to 3.53%, reflecting minor country-specific factors amid otherwise subdued global bond market movements.

In the domestic market, the yield on the long-dated R2048 bond fell sharply by 52 basis points in September, while the R2030 yield declined by 20 basis points. The local bond market delivered strong gains over the month, with the All Bond Index (ALBI) returning 3.37%, supported largely by robust performance at the back end of the yield curve.

Inflation-linked bonds also rallied during the month as real yields declined. The yield on the I2050 fell by around 25 basis points in September, reflecting improved demand for inflation-protected securities. Both the CILI and IGOV indices delivered solid performances, each returning above 3.0% for the month.

Short-term rates movements were mixed for the month. The 3-month JIBAR rate declined by 1 bp to 7.0%, while the 12-month JIBAR rose by 5 bps to 7.50%. The Alexander Forbes Short-Term Fixed Interest (STeFI) Composite Index delivered a 0.62% return for the month.

The rand has shown modest gains against the euro and the pound in recent weeks and has strengthened against the US dollar primarily due to the dollar’s broad weakness this year. The greenback has depreciated significantly over 2025, providing some support to emerging market currencies, including the rand. The local currency closed September at 17.27 to the USD.

Looking ahead, local economic fundamentals point to a lower yield environment over the medium term. Domestic growth remains subdued, while inflation is expected to stay contained in the near term. Monetary policy is likely to maintain an accommodative bias, creating room for further downward pressure on yields. Nonetheless, the global backdrop remains challenging amid persistent geopolitical uncertainty and uneven economic momentum across major markets. Against this backdrop, we continue to pursue a holistic investment approach anchored in macroeconomic fundamentals and responsive to evolving policy dynamics.