Vanishing Inflation Expectations Fuel South African Bond Rally

Dwindling inflation expectations are setting South African government bonds up to extend a rally that’s already taken benchmark yields to five-year lows.

Break-even rates, a gauge of bond investors’ expectations of average inflation, are projecting price increases will stay within the central bank’s 3% to 6% target range for the next two decades. The 20-year measure fell this week to 5.77%, the lowest on record, except for a brief Covid-induced plunge.