Select Country
Don’t have your Nedbank ID yet?
Nedbank ID single sign-on gives you full digital access to Nedbank’s banking and lifestyle products and services on the Money app or Online Banking.
Log in
Log in to Online Banking or another one of our secured services.
Get in touch
Find us
- Login & Register
- Online Banking
- Online Share Trading
- NedFleet
- Register for Nedbank ID
- Award-winning in sustainable finance and digital
- Deals
- R4bn Tronox deal funds two 100MW solar plants
- Billions to help Redefine build green properties
- Harmony pursues green goals with R10 billion loan
- Cold solutions finance for cold storage facilities
- International Finance Corporation green bond fund
- Envusa energy deal: The way for renewable energy
- Paladin Energy senior debt funding partnership
- Renewable energy wind farm financing
- Stor-Age’s successful inaugural bond auction
- R4bn Tronox deal funds two 100MW solar plants
- Billions to help Redefine build green properties
- Harmony pursues green goals with R10 billion loan
- Cold solutions finance for cold storage facilities
- International Finance Corporation green bond fund
- Envusa energy deal: The way for renewable energy
- Paladin Energy senior debt funding partnership
- Renewable energy wind farm financing
- Stor-Age’s successful inaugural bond auction
- Women of Corporate Investment Banking
- Young Analyst Programme
- Insights
- Articles
- Conferences
- Research
- Explore Insights
- Articles
- Africa's pathway to a climate-resilient economy
- Commercial property trends 2022
- Green energy in the developing world | Nedbank CIB
- How sustainable finance creates value
- How the property sector recovered in 2023
- Two wins for sustainable finance leadership | Nedbank CIB
- FURTHER IMPACT empowerment for entrepreneurs
- There's a new buoyancy around water and sanitation
- What happens when finance meets sustainability?
- Africa’s renewable-energy projects
- Breaking barriers for energy transition in mining
- Africa's pathway to a climate-resilient economy
- Commercial property trends 2022
- Green energy in the developing world | Nedbank CIB
- How sustainable finance creates value
- How the property sector recovered in 2023
- Two wins for sustainable finance leadership | Nedbank CIB
- FURTHER IMPACT empowerment for entrepreneurs
- There's a new buoyancy around water and sanitation
- What happens when finance meets sustainability?
- Africa’s renewable-energy projects
- Breaking barriers for energy transition in mining
- Conferences
- African Mining Indaba | Nedbank CIB
- COP 28 | Nedbank CIB
- South Africa (SA) Auto Week | Nedbank CIB
- IHS Affordable Housing Conference | Nedbank CIB
- Africa Energy Forum | Nedbank CIB
- Africa Down Under Conference 2024 | Nedbank CIB
- Industry leaders talk innovation disruption | Nedbank CIB
- Market leaders in property finance | Nedbank CIB
- African Mining Indaba | Nedbank CIB
- COP 28 | Nedbank CIB
- South Africa (SA) Auto Week | Nedbank CIB
- IHS Affordable Housing Conference | Nedbank CIB
- Africa Energy Forum | Nedbank CIB
- Africa Down Under Conference 2024 | Nedbank CIB
- Industry leaders talk innovation disruption | Nedbank CIB
- Market leaders in property finance | Nedbank CIB
- Research
- Investor research
- Investor-research
- How loadshedding impacts inflation | Nedbank CIB
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- SA inflation trends, insights and projections
- SA ex-ante real policy rate
- SARB: Shifting to a 25 bps hike, from 50 bps
- SARB MPC: Repo unchanged but still hawkish
- Bonds, the monetary surprise and fiscal dominance
- Upside for bond investments has compressed
- The "weak China trade" on the rand exchange rate
- Dovish inflation surprises and fiscal constraints
- The ILB curve steepens, and we expect more
- Investor Research
- Investor research
- Investor-research
- How loadshedding impacts inflation | Nedbank CIB
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- Investor Research
- SA inflation trends, insights and projections
- SA ex-ante real policy rate
- SARB: Shifting to a 25 bps hike, from 50 bps
- SARB MPC: Repo unchanged but still hawkish
- Bonds, the monetary surprise and fiscal dominance
- Upside for bond investments has compressed
- The "weak China trade" on the rand exchange rate
- Dovish inflation surprises and fiscal constraints
- The ILB curve steepens, and we expect more
- Investor Research
- Solutions
- Corporate Finance
- Financing
- Investing
- Markets
- Nedbank Business Hub
- Transacting
- Explore Solutions
- Corporate Finance
- Financing
- Investing
- Markets
- Nedbank Business Hub
- Transacting
- Sustainability
- Explore Sustainability
- Contact us
- Explore Contact us
- Contact us
- Explore Contact us
SA’s ex-ante real policy rate becomes unattractive as expectations rise
Since the start of this year, South Africa’s (SA’s) ex-ante real rate has been roughly in line with the US’s. This is the longest period in which this has been the case. SA’s ex-ante real policy rate has almost always exceeded that of the US, providing an attractive real-rate pick-up for offshore investors to invest in SA. But this year, rising SA inflation expectations, slow increases in the FRA rate and expectations for an end to SARB’s hiking cycle have kept SA’s ex-ante real policy rate unattractive relative to the US’s. In contrast, US inflation expectations have fallen, while the Federal Reserve (Fed) has remained hawkish. This has shown up in a weaker currency [USDZAR -10,4% year to date (ytd)] and higher SA bond yields [(SA 10y yield up 100 basis points (bps) ytd]. Our base case remains for a correction in one or both of these rates in the coming months. SARB will likely hike by 25 bps this month, taking the repo rate to a peak of 8,50% (with upside risks to this estimate should inflation surprise to the upside). The Fed is expected to hike twice more this year, which could push out the first rate cuts by both central banks to around the middle of 2024.
SA inflation expectations have risen recently, but falling long-run trend remains intact
SA’s BER inflation expectations survey showed a deterioration across the board in 2Q23, with average inflation expectations higher across all periods, apart from the five-year-ahead expectations, which fell 30 bps to 5,2%. Despite the recent increase, inflation expectations have maintained their long-run declining trend since 2013.
A correction in one or both of these markets is likely in the coming months
To return SA’s ex-ante real policy rate to relative attractiveness requires a lower US ex-ante real policy rate (probably by a lower OIS rate as the Fed communicates an end to its hiking cycle later this year and the market extrapolates this to price in cuts to the policy rate). Alternatively, FRA rates would need to rise to reflect a higher-for-longer approach by SARB, and inflation expectations should ease as headline inflation continues to decelerate.
Another SARB hike implies that upside for front-end bonds has compressed, in our view
SA’s bond yields moved lower for most of June, from what we would describe as a large oversold position during the second half of May (see A pessimistic reflection of current yields dated 15 May). The curve also bull steepened. However, now for the first time since early May, we would describe the front end of the nominal curve as broadly “fair”.