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South Africa’s 10-year bond yield eased to around 8.45%, its lowest level since early June, as renewed optimism over a potential US-Iran agreement reduced inflation concerns and boosted demand for fixed-income assets. Risk sentiment improved after President Trump withdrew his threat of additional strikes on Iran and indicated that a deal could be signed in Europe as soon as this weekend. The shift in tone triggered a sharp pullback in oil prices, helping to alleviate worries about inflation and the prospect of further interest rate hikes by major central banks.
On the domestic front, the South African Reserve Bank noted in its latest Financial Stability Review that another interest-rate increase could be justified this year if the conflict persists. The central bank had already raised the benchmark rate by 25 basis points to 7% on May 28, its first hike in three years, aiming to anchor inflation expectations amid persistent upside risks to the inflation outlook. Meanwhile, South Africa’s economy grew by a stronger-than-expected 0.5% in the first quarter, though the data still point to a fragile growth environment.
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