The South African bond market is once again under stress after a good start in 2022

SOUTH AFRICA - Report 01 Jul 2022 by Iraj Abedian

As market volatility has intensified globally on the back of a myriad of headwinds including elevated inflation rates that have led to a normalizing of policy rates sooner and at more accelerated rates than markets initially anticipated, the South African bond market, too, is experiencing increased volatility. The country’s bond prices have registered large movements even when small trades are involved. Overall, the South African bond market’s fragility has profoundly increased post the Covid-19 pandemic, together with the loss of the country’s investment grade status of its sovereign debt. The South African Reserve Bank notes that bid-ask spreads on the most liquid bond, the R186, have recently been averaging around double their 2019 levels owing to lower liquidity.

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