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South Africas 2025 bond rally may be masking deeper growth risks in 2026
13 February 2026
Albert BothaHead: Fixed Income
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South African bonds have had an exceptional year, but investors should not conflate the supportive impact of favourable commodity and global tailwinds with local fundamentals in assuming that the rally will be sustained in 2026.
Speaking on AssetTV’s recent Outlook 2026 Fixed Income Panel, Albert Botha said 2026 risk assessments should keep in mind South Africa’s failure to translate a historically supportive global backdrop into materially stronger domestic growth – alluding to the fact that despite favourable global conditions for local growth, South Africa’s real growth rate was struggling to stay in positive territory.
“There are risks in the SA economy that are not immediately apparent, if you think about where we find ourselves in the global context, the closest parallel that I can think of in recent history is the early to mid-2000s, when we saw the recent kind of resource boom, upwards of 40% plus of the JSC were resources, gold was running, oil prices weren't too high, and the SA economy was running at 4-5% kind of real growth rates.”
“At the moment we have the oil price at multi-decade lows, we've got gold at all-time highs, we've got high silver and platinum, and yet our economy is barely scraping real gross domestic product (GDP) per capita growth terms. We've now done three years in a row of negative GDP per capita real growth. This year we may just scrape positive growth,” he cautioned.
Botha further explained: “We should be powering at 3-5% real growth right now, but we are sleeping at barely above 1%. And I think that the risk to us is that if we have what is possibly the most favourable global macroeconomic terms we've had in 20 years, if we can't use this to grow quickly, what happens when the external tailwinds inevitably moderates again later?”
While admitting that these concerns were keeping him up at night, he did not think the external factors powering the South African economy, currency and bonds were likely to change in the short term.
He also contrasted today’s exceptionally strong terms of trade and commodity prices with weak output and declining living standards.
Fixed income outlook: favour discipline over chasing capital gains
Botha said the 2025 bond rally delivered exceptional returns, but the lessons for 2026 are about avoiding complacency and resisting the temptation to stretch for performance late in the cycle.
“Where we find ourselves now, it doesn't serve you to be greedy,” he said. “Stretching out and reaching for gains at this point of the cycle is how you could start hurting your investors in the long-term track records.”
Instead, he said Ashburton is prioritising discipline, diversification and hedging, including considering offshore exposure at current exchange rate levels. While the rand is strengthening against the dollar, they are also focusing on buying other offshore assets to provide asset class hedges.
Botha noted that even after the rally, yields still offer compelling real returns in a low inflation environment, supporting a more conservative stance. In terms of expected returns, Botha said investors should set realistic expectations and prioritise income.
“Your 10-year bond point is normally a good one to start with… somewhere between 8.2 and 8.5,” he said. “So I think 8 to 8.5 is where you want your portfolios to sit.”
A warning for retirees: don’t reach for yield at the wrong time
Botha flagged a growing challenge for interest-dependent investors, particularly retirees, as nominal yields drift lower.
“Many retirees that live off interest, and they've been living off 9-9.5%, and now they're going to be living off 7.5-8%,” he said. “That translates into a 20% drop in their income, and they're going to have to deal with it somehow, because the other alternative is to take more risk for higher reward, but that’s not an advisable strategy for retirement.”
He believes it is important for investors to resist short-term urges in response to the rallies of certain stocks and bonds, and to continue being cautious and well-diversified in the face of volatility risk, especially from unexpected geopolitical events, in 2026.
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Our team of investment specialists is ready to discuss how we can help you achieve your financial objectives.
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