JOHANNESBURG: South Africa's government bonds weakened and yields were higher on Friday as the local market scales back its expectations of a domestic interest rate cut this year.
Local debt also moved in tandem with the rand currency and other emerging market assets, weighed down by US Federal Reserve minutes which suggested it might pull out of its asset-buying programme sooner than expected.
"Obviously it's a risk off sentiment - on the back of that the currency sold off and bonds followed suit," said Kgosi Tshite, a bond trader at Investec.
The rand was 0.34 percent weaker at 8.6145 by 1538 compared with its close at 8.5850 by Friday.
The yield on the 14-year benchmark went as high as 7.41 percent, its strongest in two weeks, and was last up 7 basis points on the day at 7.375 percent.
Investors also dumped the shorter-dated 2015 issue , and the yield subsequently climbed 3 basis points to 5.395 percent.
Bond traders are expecting increased local supply from next week when South Africa's Treasury resumes weekly auctions where it offers about 2.1 billion rand worth of debt to primary dealers.
Yields have also been boosted by the market slashing its expectations that the Reserve Bank will reduce domestic rates this year, amid rising inflation pressures.
The bank kept rates on hold for most of 2012 on elevated risks to the inflation outlook, reducing them only once in July by 50 basis points to a four-decade low of 5.0 percent.
"We're still pricing in a rate cut, but we're pricing it less than what we did about a month ago," Investec's Tshite said.
Center>Copyright Reuters, 2013