Daily Market Report – 16 May 2025

Masondo’s Market-Moving Messaging: A Double Win

1. Budget Certainty: “100% Support”

Masondo’s confirmation that the GNU will back the third budget is a watershed moment for fiscal confidence. It signals:

• Political cohesion in the coalition
• Implicit support for fiscal consolidation
• Reduced risk of tax hikes (e.g., VAT), favouring austerity through spending control

Market Implication

• ZAR appreciated to 18.0150, now poised to break below 18.0000
• SA sovereign risk premium drops, aiding bond inflows
• Positive signal for S&P assessment, potentially shifting to a “positive outlook”

2. Inflation Target Overhaul: 3% on the Cards

Masondo’s second bombshell: a coming revision to SA’s inflation targeting regime.

Current:

• 3–6% band
• Preference for midpoint: 4.5%

Proposed Shift:

• Move to single target (likely 3%), aligning SA with global EM peers

Monetary Policy Impact

• Tighter bias short-term = delayed rate cuts
• Higher real rates = more attractive ZAR carry trade
• Lower long-term rates = boosts bond market appeal

Mining Malaise: A Blip Amid Policy Gold

March Mining Production

• YoY: -2.8%
• Dragged down by:
  • Gold: -11.1%
  • PGMs: -9.9%
• Reaffirms deindustrialisation trend and failure to monetise rising gold prices

ZAR Outlook: Rallying with Real Reason

Technical Levels

• Spot: 18.0150
• Support: 17.8850 (break would signal new bullish wave)
• Resistance: 18.2800 (historical pivot)

Sentiment Drivers

• Budget optimism
• Inflation target reform
• Global risk appetite + USD softness

Fixed Income: Bonds Rally, Yields Drop

Bond Market Reaction

• Yields down across curve
• Masondo + Creecy (private sector rail handover) + budget cohesion = Operation Vulindlela momentum
• ILB underperformance validates lower inflation outlook

FRA Curve: Rate Cut Expectations Repriced

• Curve flattening = SARB caution priced in
• Market now sees just 1–2 cuts for 2025
• Stronger ZAR + tighter inflation regime = reduced cut urgency

Global Snapshot: Dollar Eases, Fed Cut Odds Rise

US Data Weakness

• PPI -0.5% MoM
• Core retail sales -0.2%
• Factory output -0.4%
• UST 10Y yield falls to 4.449%

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.