Weekly Fixed Income Market Commentary – 7th – 11th November 2022

Last week, lower than expected US CPI numbers signaled cautious optimism for global markets, the UK reported a contraction in their GDP, while South Africa signed a climate financing deal designed to lay the foundations for a stronger green economy.

International Market Developments


The highlight for the week was the lower-than-expected US CPI for October of 7.7% y/y against expectations of 7.9% y/y. This was warmly received by the markets, on optimism that the Federal Reserve would reduce the size of future rate hikes from the 75bps hikes seen over each of the last four meetings to possibly a 50bp hike at the next meeting.

Commentary from the Bank of England (BOE) remained hawkish, signaling that efforts to control inflation could take 18 months to 2 years, with further increases to interest rates likely in the months ahead, with inflation expected to peak in the next few months.

The propensity for rising interest rates in the US, albeit at reduced levels, will continue to impact global debt listed in USD. South African government yields will remain under pressure, as policy rate hikes in the United States will continue to put pressure on our currency.

Recession Risk

The Chinese economic struggles (with the no end in sight of the Zero-Covid policy), hawkish central banks, and the European energy crisis will continue to weigh on commodities prices and global economic growth. The UK reported a contraction in GDP in Q3 of 2022 of 0.2% q/q (2.4% y/y) following an increase of 0.2% q/q in Q2 (4.4% y/y). The contraction marks what could be the start of a lengthy recession.


The ongoing war in Ukraine and the associated energy crisis continues to drive volatility and uncertainty in the markets, leading to market illiquidity and rising yields.

Local Market Developments

South Africa signed a $8.5bn climate package as part of the Just Energy Transition Investment Plan. Intended to pave the way for a sustainable and fair transition towards cleaner forms of energy, the funding will be geared towards coal plant de-commissioning, funding alternative employment in coal mining areas and investments which will facilitate accelerated deployment of renewable energy and investments in new sectors of the green economy. The Just Energy Transition Partnership is expected to serve as a prototype for similar deals with coal-dependent, developing nations such as Vietnam, Indonesia and India.
SA’s CPI (7.5% y/y) remains above SARB’s inflation target range of 3-6%, and this, along with a further 75bps tightening by the Fed earlier this month, is consistent with our call for another 50-75bps hike by the SARB towards the end of November.
Public Servants took part in marches across several different provinces last week Thursday following government’s decision to unilaterally implement a 3% wage offer. They have now given the government seven days to respond to their list of demands.

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