Foreign investors offloaded more rand-denominated debt than what they bought last year, as demand for emerging market bonds declined.
Experts say falling liquidity raises the risk that it will be more difficult to sell the bonds in the event of any deterioration in sentiment.
Bonds are rallying after the Reserve Bank’s hiked rates in an effort to assure South Africans and investors that inflation will not run away.
Ratings agency Fitch has downgraded its South African outlook to negative, and analysts expect Standard & Poor’s to downgrade too.
The rand has bounced back from a five-year low on expectations that the Reserve Bank will raise the repo rate as inflation grows.
US unemployment data may show enough recovery for the Federal Reserve to begin reducing monetary stimulus.
The rand has gained following a drop which appeared to have been overdone.
The rand has moved up and down by news of both Fed tapering and Fitch’s affirmation of the country’s credit rating.
Speculation over whether the US Fed will begin tapering sees the rand drop ahead of a decision.
The rand has slumped to the weakest level in two and a half months against the dollar as a bond sell off reached the longest streak since May.
As the rand weakened for the first time in three days against the dollar, economists expect a report will show manufacturing growth slowed in August.
There is concern that poor results like that of manufacturing will limit the Reserve Bank’s ability to reduce inflation eroding value bonds.
The rand has depreciated as investors gauged that a surge against the dollar, after the US Fed suddenly maintained monetary stimulus, was overdone.
The rally of the rand in recent days will likely continue to lose steam as the market looks out for a decision to cut monthly bond purchases.
Yields on South African bonds jumped to the highest level in 19 months as inflation accelerated and the rand slipped to a six-week low.
The rand has slumped to a six-week low and bond yields soared to the highest in 16 months.
The rand declined as South Africa’s largest trading partner China, shows signs of a sustained economic slowdown.