JOHANNESBURG: South Africa's rand weakened on Thursday while government bond yields climbed in line with global debt market trends amid a deterioriating inflation outlook due to rising oil and food prices rises.
However, the sell-off of local debt was partly off-set by steady demand from fund managers that track Citigroup's influential World Government Bond Index, which South Africa is set to join in October.
The yield on the heavily traded 14-year government bond rose four basis points to 7.61 percent in early trade, and that for the three-year bond added three basis points to 5.71 percent.
"It's all in line with what's happening internationally where the US tenure and all other yields across the world are rising as the global inflation picture worsens," said Marten Banninga, head of bond trading at WWC Securities.
"Also the statement by Finance Minister Pravin Gordhan that domestic growth will be lower than current estimates is a clear indication than government funding may need to increase this year."
The Treasury in February forecast growth of 2.7 percent for 2012 but Gordhan reiterated during a visit to Argentina this week that output might undercut the estimate as a downturn in Europe weighs.
By 0659 GMT the rand was 0.43 percent weaker at 8.2725 against the dollar, pulling away from recent three-month highs as waning expectations of policy easing in the US boosted the greenback against most major currencies.
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