Regional Bank Stress Sends Shockwaves Through US Markets

Concerns over the stability of US regional banks deepened this week as a series of disclosures triggered renewed volatility across global markets.
Zions Bancorporation announced a $50 million charge-off tied to California property loans, while Western Alliance faced fraud allegations involving Cantor Group V. The regional banking index tumbled 5.8%, reviving fears that isolated losses could expose systemic weaknesses.

Analysts warn the developments may represent the “canary in the coal mine” for a late-stage business cycle already strained by tight liquidity. The combination of a prolonged government shutdown, high bond yields, and limited access to funding has amplified stress within smaller US banks.

Adding to pressure, the Secured Overnight Financing Rate (SOFR) has spiked, signalling growing tension in short-term funding markets. Although not yet at danger levels, sustained increases could suggest monetary policy transmission is breaking down.

The Federal Reserve, already under scrutiny for ending quantitative tightening, may be forced to pivot toward easier policy sooner than expected. The sharp decline in Treasury yields this week supports that view, with markets now bracing for renewed asset price volatility.

Rand Supported as Dollar Retreats on Banking and Policy Fears

The rand (ZAR) held firm around R17.35/$ on Friday as the US dollar index weakened amid banking jitters and mounting speculation that the Federal Reserve will pause tightening.
US bond yields dropped sharply, with investors pricing in the possibility of near-term rate cuts. The R209–US 10-year yield spread remains wide at 529 basis points, preserving South Africa’s carry advantage and underpinning demand for local assets.

Gold and platinum prices continued to climb—gold reaching a record $4,358/oz—enhancing South Africa’s terms of trade and offsetting global risk aversion. Should US policymakers confirm a policy shift, analysts expect the ZAR to strengthen further toward the R17.30/$ level.

Spot at time of writing: 17.3500
Range for the Day: 17.2050 – 17.4850

Bond Market Rally Deepens as Yields Hit Multi-Month Lows

Bond investors worldwide continued flocking to safety, pushing US 10-year yields below 4% for the first time since April and 2-year yields to 3.43%, their lowest since 2022.
The global rally, sparked by the US banking turmoil and renewed trade tensions, rippled through South Africa’s market, where local yields fell across the curve.

Investors anticipate further dovish signals from the SARB, particularly as the central bank targets a lower 3% inflation anchor. Forward Rate Agreements (FRAs) indicate expectations for two rate cuts within 12 months, with the 9×12 FRA reflecting roughly 52 basis points of easing.

In the US, declining yields highlight growing doubts about economic resilience. The Philadelphia Fed’s manufacturing index plunged to -12.8, and continued political gridlock in Washington has left traders “flying blind” amid sparse economic data.

Oil Slides for Third Straight Week as Oversupply Concerns Mount

Oil prices fell for a third consecutive week, weighed down by renewed US-China trade frictions and rising inventories.
Brent crude hovered near $61/barrel, while WTI traded just above $57, marking the steepest monthly decline since March. Traders fear that a potential US-Russia peace deal could release additional OPEC+ barrels into an already oversupplied market.

Meanwhile, the IEA raised its 2026 global oil glut forecast by nearly 20%, citing weakening demand and surging US output.

In soft commodities, cocoa prices surged up to 4% in both London and New York after European grindings fell less than expected, suggesting resilient demand despite high consumer prices.

Gold and Silver Rally to Record Highs as Safe-Haven Demand Intensifies

Safe-haven demand catapulted gold and silver to historic highs amid escalating global uncertainty.
Gold climbed to $4,379.93/oz, its strongest weekly advance since 2020, while silver soared to $54.38/oz, driven by physical shortages in London and record ETF inflows.

Traders now expect at least one major Fed rate cut before year-end, further boosting non-yielding assets. Central-bank purchases and geopolitical tensions have added momentum, with platinum and palladium also rallying sharply.

Global Policy and Politics: Trump-Putin Talks, UK Budget, Japan Holds Steady

• Trump–Putin Summit Planned: The US president announced a Budapest meeting with Vladimir Putin aimed at achieving a Ukraine ceasefire, although previous negotiations faltered.
• UK Budget Outlook: Chancellor Rachel Reeves signalled a November budget focused on energy price regulation and tax increases for the wealthy, while avoiding a new bank levy.
• BoJ Governor Ueda reaffirmed Japan’s gradual policy normalisation, though political instability makes a December hike more likely than October.

Chart of the Day: SA Assets Outperform on Improved Fiscal Sentiment

The chart on page 9 shows that South African assets—equities, bonds, and the rand—have outperformed global peers this year, buoyed by a weaker USD, improving fiscal sentiment, and optimism about a dovish Fed stance.