Over the past month cash returned 0.5%, while the fund delivered a return of 0.4%.

Relative to the 90 day maximum average duration, the Fund is currently running an effective duration of 77 days. CPI inflation was 0.3% for the month of August and 3.6% for the year to
31 August 2012.

CPI inflation for May 2012 surprised on the downside at 5.7% year-on-year versus market expectations of 5.9% year-on-year. This was markedly lower than April 2012's 6.1% year-on-year figure. Part of the inflation slowdown was due to food price increases beginning to moderate and also a decline in commodity prices.

PPI inflation was unchanged for May 2012 at 6.6% year-on-year against the consensus expectation of 6.3% year-on-year, indicating that for the moment, price pressures at the manufacturing level remain contained.

Private sector credit extension in May 2012 came in at 8.3% year-on-year, higher than the consensus expectation of 8.0% year-on-year and significantly more than the April 2012 figure of 7.3% year-on-year. Most of the acceleration stemmed from base effects from preceding months although the largest portion of the upside surprise came from the investments category (which is very volatile).

The FRA curve has dropped 70 basis points starting in the 6 month area, to a seven month low of 5.2%, a 27 basis point gap lower than the Reserve Bank's benchmark 5.5% lending rate. This implies a 70% chance of a rate cut in early 2013.

CPI inflation for February 2012 dropped unexpectedly to 6.1% year-on-year, lower than January 2012's figure of 6.3% year-on-year and substantially lower than the consensus figure of 6.4% year-on-year. Headline inflation reversed the sharp jump in January as the slowing of food prices was greater than expected due to global food prices coming off recent highs and the strengthening of the rand resulting in cheaper imports.

The 8.3% year-on-year PPI figure for February 2012 came in higher than the consensus forecast of 8.0% year-on-year but still lower than January 2012's figure of 8.9% year-on-year. Month on month prices rose, largely driven by an increase in precious metals and oil prices, although declines in agriculture and basic metal prices provided a marginal offset.

Private sector credit extension once again exceeded expectations at 7.9% year-on-year for February 2012 against the consensus figure of 7.0% year-on-year. This was sharply higher than the January 2012 figure of 7.3% year-on-year with the strongest growth seen in the "other loans and advances" category, indicating a combination of higher unsecured loans to households and corporates.

The SARB left the repo rate unchanged at 5.5% in March 2012 and marginally lowered its inflation forecasts and raised its growth forecasts - which was seen as dovish by the money market although there appears to be a growing consensus for rate hikes before the end of 2012.

Based on the steepening FRA curve the market now expects an interest rate increase in in the last quarter of 2012, particularly emphasized by the increase in the rates at the long end of the curve.

CPI inflation for November 2011 breached the upper limit of the inflation target band but came in slightly lower than expectations at 6.1% year-on-year compared with October's number 6.0% year on year. The consensus expectation was 6.2% year-on- year. The main factors leading to the rise were transport costs due to the fuel price hike, upward price pressure from food prices and a weaker rand, although core inflation still remains subdued at 3.9% year-on-year, up slightly from 3.8% year-on-year in October.

November's PPI inflation rate decreased to 10.1% year-on-year, down from October's figure of 10.6% year-on-year. This was markedly lower than the consensus expectation of 10.5% year-on-year. Downward price pressure was due to the transport, electricity and mining inflation categories.

Private sector credit growth increased to 6.2% year-on-year in November, up from the 5.5% year-on-year October number and higher than the market expectation of 5.9% year-on-year. Once again, there was an increase in unsecured lending mostly driven by households. However, corporate credit extensions are still growing faster than household credit extensions. The FRA curve remained virtually unchanged compared with last month, although there was some marginal steepening indicating that the market is now beginning to predict the possibility of a rate hike towards the end of 2012.