South Africa’s 10-year bond yield reached a nine-month high at 10.75%, fueled by fiscal policy concerns and global economic uncertainty. The GNU failed to present its first budget due to opposition against a VAT increase. This situation is further complicated by a recent reduction in US funding and ongoing trade tensions, although the country avoided a technical recession with a slight growth of 0.6%.
South Africa’s 10-year government bond yield has surged to 10.75%, marking the peak not seen since early June 2024. This rise is attributed to concerns surrounding the country’s fiscal policy and broader uncertainties in the global economy.
Recently, the Government of National Unity (GNU) faced significant challenges as it failed to deliver its first budget, a historical event since the end of Apartheid. The budget was delayed after the Democratic Alliance (DA) and other coalition members opposed a proposed 2% increase in the value-added tax (VAT).
The global backdrop for South Africa’s fiscal situation has shifted dramatically since the budget postponement. Notably, US President Donald Trump’s withdrawal of $1.4 billion in funding and the escalating tensions around trade have compounded the challenges.
Despite these fiscal hurdles, South Africa managed to avert a technical recession in the last quarter of 2024, experiencing an economic growth of 0.6%. Nonetheless, the growth is deemed insufficient to address the country’s structural challenges effectively.
In summary, South Africa’s financial landscape is under pressure, with the 10-year bond yield reaching a nine-month high amid significant fiscal policy challenges. The postponement of the budget and adverse global economic conditions, including reduced US funding, contribute to the uncertainty. While the economy showed slight growth, more robust measures are required to overcome structural issues.
Original Source: www.tradingview.com
