JOHANNESBURG: South African government bond yields rose on Monday ahead of a weekly auction on concerns about the additional supply, while the rand reversed earlier gains as global risk appetite stayed weak due to doubts over the outlook for the euro zone.
The yield on the three-year benchmark closed a basis point higher at 6.11 percent and that for the 14-year issue added two basis points to 8.145 percent.
"The market is getting nervous about the supply tomorrow and more importantly CPI on Wednesday," said Di Luo, an interest rate strategist at HSBC in London.
The national Treasury is expected to inject 2.1 billion rand in total worth of its 2017 and 2021 paper on Tuesday, as well as a new 11-year bond due in 2023.
Besides the weekly auction, consumer inflation data due out on Wednesday will offer the market clues on the domestic interest rate outlook for the rest of the year.
Some market players are pricing in a possible cut before year-end as economic growth remains anaemic while price pressures are relatively benign.
"South African (debt market) rates have rallied hard ahead of the Greece election weekend, so even though the result was modestly positive the market wasn't pricing in any negativity to begin with, so there has been a retracement," Luo added.
Cautious optimism over the Greek poll result pushed the rand to a 1-1/2 week high of 8.2334 to the dollar earlier on Monday.
But the currency later gave up those gains as uncertainties over the debt crisis in the euro zone which have weighed on risk sentiment for months resurfaced.
The local unit was at 8.3669 to the greenback by 1548 GMT, down 0.17 percent from Friday's close at 8.3525.
"The rand remains very volatile in the current environment and it will remain highly vulnerable to any shifts in global risk appetite," Danske Bank said in a note.
"We view scope for strengthening as very limited given the rand's over valuation and the current risk-off environment."