From Macroeconomic Shocks to Geopolitical Tensions: Does it Drive South African Government Bond Return Volatility?

The objective of the study is to determine the effect of macroeconomic variables and geopolitical risk on South African government bond index return volatility. In doing so, the study implemented monthly data for the period January 2005 to September 2025. The exponential generalised autoregressive conditional heteroskedasticity (EGARCH) model revealed that inflation growth rate and interest growth rate do not drive government bond return volatility. On the contrary, the real effective exchange growth rate has a significant negative effect on the All-Bond index, one- to three-year bond and three- to seven-year bond return volatility. Similarly, South African geopolitical uncertainty has a positive significant effect on South African government bond return volatility. Interesting to note, the study findings positive leverage effects across the government bond returns, suggesting that positive news has a greater effect on return than negative news. Collectively, the study provides new evidence on the derivers of government bond return volatility, suggesting that such derivers yield asymmetrical effects.