SARB Deputy Governor details yield curve's policy role
South African Reserve Bank Deputy Governor Rashad Cassim discussed the central bank's approach to financial markets and the bond yield curve in monetary policy decision-making. He delivered his keynote address at the LSEG Insight Series Event in Johannesburg on June 24, 2026.
The single rate's market sway
The South African Reserve Bank (SARB) now relies on a single policy rate, having formally retired the 'repo rate' term this year.
This change follows a 2022 monetary policy implementation framework shift, where the SARB takes deposits from banks, paying the policy rate for overnight deposits.
This SARB deposit is the safest and most liquid rand asset, serving as a benchmark for financial markets.
For instance, a 91-day Treasury bill yields 7.26% against the current 7% policy rate, reflecting its slightly lower liquidity and longer lifespan.
Mortgages, being less safe and liquid, cost around 9–10%, with the spread compensating for higher risks.
This demonstrates the policy rate's power to influence a wide range of asset prices across the economy.
Decoding the yield curve
The bond yield curve, showing interest rates on government debt instruments, is a crucial topic.
Economists decompose long-term yields into an expected short-rate path and a term premium, which captures future risks.
While the SARB influences short rates and parts of the term premium (like inflation risk through credible targeting), other factors also play a significant role.
These include government debt trajectory, perceived unsustainability, and the volume of debt issuance, which can strain institutional balance sheets and affect pricing, lying outside the central bank's direct control.
Macro reset delivers, but challenges remain
South Africa's recent 'macro reset' has notably lowered government debt yields, driven by a new inflation target and strong fiscal commitment, despite no real growth turnaround.
This progress, though temporarily disrupted by the Middle East crisis, allowed for a cautious policy approach with rates left unchanged or modestly increased.
Anchoring inflation expectations closer to 3% and pursuing structural reforms are crucial for further gains and credit rating upgrades.