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africa JOHANNESBURG: South African government bond yields continued their decline on Tuesday, with the return on three-year bonds hitting a record low, as domestic investors join foreigners in the hunt for yield.

The rand weakened slightly against the dollar as the market digested US Federal Reserve chairman Ben Bernanke's promise of further stimulus for the sluggish US economy if needed, though he provided no specific details.

At 1538 GMT, the rand was down 0.2 percent against the dollar, from Monday's New York close of 8.2100.

Bernanke told lawmakers that the Fed was "prepared to take further action" to support an economy struggling to create jobs but did not spell out what that would entail.

"It will be disappointing for some," Luke Barnett, an analyst at ETM Analytics said of the testimony. "Some people were expecting a time frame or measures he was going to introduce."

Barnett said the rand would probably continue to trade within a tight range ahead of the South African Reserve Bank's interest rate decision on Thursday. The majority of economists polled by Reuters expect the bank to hold its repo rate at 5.5 percent.

The yield on South Africa's benchmark 3-year bond fell to yet another record low of 5.71 percent, down 5 basis points from Monday, while that on the 14-year bond dropped to 7.435 percent from 7.566 percent previously, its lowest since 2009.

Increased buying by domestic investors was helping to push yields lower, said Ashley Dickinson, a bond trader at Renaissance Capital.

"Over the last week we've seen local investors getting involved," he said. "I think they realised that they had missed the boat with the initial rally in the market. Most of the fund managers in the South African space are still pretty much underweight bonds."

South Africa's Treasury sold a total 2.1 billion rand ($255.39 million) worth of its 2023, 2036 and 2048 bonds on Tuesday, with yields declining across all tenors.

Copyright Reuters, 2012