Fixed Income Market Commentary – 14th – 18th November 2022

Last week, lower than expected US PPI numbers supported the cooling inflation narrative; global markets were cautiously optimistic on geopolitical risks as US-China relations strengthened. Chinese regulators announced a 16-point rescue plan for property developers; meanwhile South Africa remained on wait-and-see ahead of the Monetary Policy Committee meeting on the 24th of November.

International Market Developments


Federal reserve vice chair Brainard said the central bank should soon moderate the size of the interest-rate increases during a fireside chat with Bloomberg. Christopher Waller said recent data is making him “more comfortable” with a reduced 50-bps hike next month, but added we have a long way to go. Mary Daly said, 4.75%-5.25% was a reasonable range to get to before holding and reiterated that pausing is off the table for now.

United States producer price inflation numbers were key this week with the market expecting 8.4% y/y from a prior of 8.5%; producer prices came in softer than expected at 8.3%, adding to a slowing inflation narrative.

Recession Risk

Chinese regulators set out a sixteen-point rescue plan to aid property developers navigate the debt crunch; the China developers’ dollar-bond index rallied on the back of this and news of China’s optimized COVID restrictions.

Large tech companies such as Amazon are planning the largest ever layoffs, targeting devices, retail, and HR departments.  Twitter, Stripe, Meta, Facebook, Lyft, and Amazon have announced huge layoffs, as big techs have got significantly smaller. Tech companies that are downsizing will play catch up when the economic downturn is over.


United States president Joe Biden and Chinese communist party leader Xi Jingpin reached a milestone in avoiding a clash between the U.S. and China. The U.S. president assured that there will be “no new Cold War” with China.

On Wednesday, Markets were softer as geopolitical risks weighed on global sentiment following a Russian made missile straying into Poland, killing two citizens. Comments from the US president and G7 officials set a calmness.

Local Market Developments

The MPC is due to sit to make an interest rate decision for South Africa and some economists have started to tilt towards a 50-bps hike following a softer US CPI print.  There are two risks identified by the market which is the December FOMC meeting and the ANC elective conference. While headline CPI has peaked, there is some nervousness around the trend of core inflation.

Furthermore, the public sector wage bill is likely to balloon following an increased offer by government to 7.5% on Thursday.  The initial offer was 3% wage increase. Unions have responded to governments offer saying that, the previously agreed R 1000 cash-allowance was sneakily combined in the calculation and that the government is trying to “pull wool over their eyes.”

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