South Africa's government bonds weakened on Thursday, erasing earlier gains as the Reserve Bank said the inflation outlook had deteriorated, a hint that the chances of another rate cut had diminished.
Yields rose across the curve with the long end of the curve hit harder by the sell-off.
"There was a lot of focus on the upside risks to inflation which suggests rate cuts could stay firmly out of the picture," said Anisha Arora, emerging market analyst at 4CAST.
The rand gained sharply after the central bank's comments on inflation, hitting a one-week high of 7.92 against the dollar, a 1.5 percent gain from Wednesday's New York close of 8.05. By 1612 GMT, it had retreated to 8.0067.
"The rand's gains following the monetary policy statement seemed somewhat optimistic. The global -- mainly the European developments -- will continue to be the key and that will leave dollar/rand vulnerable to further upside, Arora added.
The rand has been extremely volatile in the past three months as the euro zone debt crisis has deepened. It has lost 12 percent since the beginning of September.
The Reserve Bank said the rand's recent weakness was an upside risk to inflation but the impact would be limited unless the currency continues to depreciate.
The rand hit a 28-month low of 8.4950 in September and has been struggling to shake off the weaker trend, failing several times to break resistance at 7.80.
On the fixed income market, the yield on the 2015 bond was up one basis point on the day at 6.54 percent, after hitting a session low of 6.41 percent before the MPC decision.
The 2026 yield went up 6.5 basis points on the day to 8.355 percent, from a session low of 8.205 percent.