Q3: Coronation Money Market Fund

This commentary is for the retail class of the fund.

PERFORMANCE

The Fund generated a return (net of management fees) of 1.73% for the third quarter of 2026 (Q3) and 7.00% over a rolling 12-month period. This return is ahead of the three-month Short-Term Fixed Interest (STeFI) benchmark return of 6.76% over the one year.

POSITIONING AND OUTLOOK

Q3 was defined by a shift to hawkish policy rate outlooks as elevated inflation readings forced monetary tightening to resume. Inflation readings continue to accelerate on the back of rising energy costs, while other domestic price pressures have been more subdued.

The South African Reserve Bank (SARB) voted unanimously to raise the repo rate by 25 basis points (bps) to 7.25% at the September Monetary Policy Committee (MPC) meeting. The SARB’s statement messaging strongly focused on the need to contain second-round effects and anchor inflation expectations. Headline inflation is now seen above 5% in the fourth quarter of 2026 and the first quarter of next year, moderating slowly to 3% by the end of 2028. Food and core goods inflation are seen as buffers in the near term. Growth for 2026 was revised down to 1.2% from 1.4%, following a below-expectations Q2 contraction and risks to growth were assessed to be on the downside.

SA’s headline inflation ticked up to 4.4% year on year (y/y) in August from 4.3% y/y in July, while core inflation edged down to 4.1% y/y from 4.2% y/y. The overall inflation data showed limited evidence of a broadening of price pressures, with headline inflation benefitting from limited inflation in food prices, and a moderation in electricity prices. However, the outlook for fuel prices has deteriorated materially, and services inflation is still uncomfortably high. We expect headline inflation to average 4.4% in 2026, noting the risk of further tightening by the SARB.

The ZARONIA index increased by 24bps to 7.11%, following the repo rate hike. Financial markets are pricing in a rate hike for November when the SARB meets again and one more rate hike in 2027. The short-end NCD curve (0-6 months) increased, on average, by 43bps as the front end of the curve priced in the repo rate hike. We believe this is a hawkish view driven mostly by global sentiment rather than domestic economic data. T-bills with six- and nine-months term remain a good source of yield pickup relative to NCDs.

During Q3, the Fund increased its exposure to nine-month T-bills, short-dated floating rate government bonds and step rate notes. The search for yield pickup in the primary credit auctions continues, as evidenced by the strong demand the auctions garner. While we have found few attractive options, overall credit exposure is expected to decrease gradually from here.

We remain cautious by investing only in instruments that are attractively priced relative to their underlying risk profiles. Capital preservation and liquidity remain a key focus for this Fund.

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