Daily Market Report – 11 June 2025

South Africa: Structural Decay in Manufacturing Deepens

1. April Manufacturing Production – A Red Flag

• April’s -6.3% y/y decline marked the worst reading since March 2024 and the sixth consecutive y/y contraction.
• Well below the Bloomberg consensus of -4.5%, this confirms that industrial weakness is more entrenched than anticipated.
• Key challenges:
  • Crumbling infrastructure
  • Restrictive regulations
  • Policy uncertainty
  • Inefficient service delivery
• The data aligns with Absa PMI, still below the 50 threshold, suggesting prolonged contraction.

2. Government Credibility and Data Concerns

• Stats SA defends its unemployment figures, despite criticism and growing calls for a recount.
• Structural policy gridlock continues — DA mulls Helen Zille as Gauteng mayoral candidate; Ramaphosa to meet NPA chief over deep-state claims, exposing institutional fragility.

Global: World Bank Trims Growth Outlooks Amid Policy Turbulence

1. Downgraded Global Growth Projections

• Global 2025 GDP now at 2.3%, lowest non-recession figure since 2008.
• Downward revisions for 70% of economies, including:
  • US: 1.4%
  • EU & Japan: weaker across the board
  • SA: from 1.8% → 0.7% (2025); 1.9% → 1.1% (2026)
  • China: steady at 4.5% thanks to policy headroom

2. Trade Truce Buoys Sentiment

• US-China reached a framework to implement the Geneva agreement, focusing on export controls and tech access.
• Still fragile: Tariffs remain, and confidence hinges on further detail.

ZAR Market Insight: Currency Outperforms Fundamentals

1. USD-ZAR Trends

• Spot: 17.6900, trading within 17.60 – 18.10 band.
• Technically: Testing 76.4% fibo support at 17.70, no reversal signals yet.
• The ZAR’s strength surprises many given:
  • Manufacturing collapse
  • Poor fiscal metrics
  • Unreliable municipal delivery
  • Sub-investment rating status

2. FX Rationalization – Relative Attractiveness

• FX is a relative game, and right now:
  • ZAR is benefiting from global dollar weakness, strong terms of trade, and high real yields.
  • The USD faces:
    • Overvaluation concerns
    • Widening deficit
    • Uncertain Fed policy
    • Trade policy volatility

Fixed Income: ZAR Strength Lifts Auction Sentiment

1. Bond Auction Performance

• Vanilla bond auction well supported despite lower demand:
  • Bids: R14.685bn (vs R17.885bn prior)
  • Still healthy cover ratio near 4X
• Longer-dated maturities (R2037, R2044, R2048) slightly dampened appetite.

2. Structural Bull Flattening

• Ongoing bull flattening has eased somewhat but continues.
• If ZAR and US Treasuries hold gains:
  • NT can refinance at lower yields
  • Reduces debt-service burden
  • Enhances fiscal credibility

FRA Landscape

• SARB’s likely inflation target revision to 3% will cap future hikes.
• But a second 2025 rate cut remains “a bridge too far” without further inflation declines.

Global Rates: CPI in Focus, but Treasury Demand Mixed

1. US CPI Preview

• Core CPI expected at 2.9% y/y, but Goldman warns tariffs may lift it to 3.5% by Dec.
• Treasury auction results:
  • 3Y bid-to-cover at 2.52, slightly soft
  • Eyes now on 10Y & 30Y demand

2. EUR & GBP Outlook

• EUR/USD anchored around 1.1400 due to option clusters.
• GBP under pressure after weak UK payrolls data, with BoE rate cut odds rising.

Why choose TreasuryONE

Minimise the impact of market volatility on your bottom line by getting access to an experienced team of dealers that provides expert market advice – validated by facts and figures, not feelings or hearsay.

We customise risk management strategies to achieve the most competitive rates in a fast-moving and complex marketplace.

We provide effective and measurable processes for managing:

• Exchange Rate Risk arises when an organisation conducts business in multiple currencies, either through exports and imports, or through foreign operations.
• Commodity Price Risk is the financial risk posed to an entity’s financial performance and profitability by fluctuations in commodity prices that are primarily driven by external market forces and are therefore beyond the entity’s control.
• Interest Rate Risk management for companies involves identifying, measuring, and managing the potential impact of changes in interest rates on a company’s financial position and profitability.