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Market Commentary | The week that was

Bond crisis: The South African Reserve Bank (SARB) has expressed concerns that local investors may be unable to offset the impact of foreign investors selling government bonds amid the country's economic challenges. The SARB's financial stability report highlighted the significant structural shift caused by foreign investors selling SA government bonds since 2019, despite the substantial increase in government bond issuance during that period. The potential gap left by foreign investors could lead to market liquidity issues, heightened volatility, and higher domestic government bond yields, raising concerns about the country's financial stability.

Bird Flu outbreak: The recent highly pathogenic avian influenza (HPAI) outbreak in the Western Cape has resulted in the culling of 550,000 chickens and the destruction of eggs, causing significant financial losses for farmers. The Bird Flu outbreak, in combination with power cuts and rising costs, creates a challenging situation for poultry producers and can lead to higher egg prices for Western Cape consumers, as producers and retailers source eggs from other provinces, resulting in increased transportation costs.

Markets: On Friday, the South African Rand rose by approximately 1% due to the anticipation that the US Federal Reserve will maintain its current interest rates this month. The CME FedWatch tool indicates the probability of a 25-basis points interest rate hike. The Fed has decreased from 50% to 20% within a week, leading to a shift towards more volatile currencies. On Monday, 5 June, the rand's exchange rates were R19.55/$, R20.92/€, and R24.31/£, and Brent crude oil priced at $76.96 per barrel.

Looking ahead: This week, South Africa will release its first quarter of 2023 GDP figures, giving insight into whether the country has entered a technical recession. The Bidvest Group Ltd. has its 10-month trading update, which will provide further updates on the health of SA Inc.

Global: The Eurozone GDP, Employment change, retail sales data, and the US Goods and Services Trade Balance will be released.

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