South African government bonds rallied sharply on Wednesday and the yield on the benchmark note fell to 9-month lows as a gloomy global economic climate cast a shadow on the domestic outlook.

Stocks fell to their lowest level in more than five weeks with Kumba Iron Ore leading the pack, while the rand came off earlier lows against the dollar but remained vulnerable to uncertainty over debt developments in Europe and the U.S.

Analysts said news that Africa's biggest economy has agreed to a 2.5 billion rand bailout for neighbouring Swaziland to help it through a budget crunch had little impact on financial markets.

The yield on the four-year bond fell as much as nine basis points to 7.12 percent, its lowest level since late November 2010, while that for the 2026 paper dropped 8.5 basis points to 8.225 percent as markets saw fewer chances of interest rates going higher this year.

"We have broken quite a few big technical levels recently with the benchmark; starting with 7.22 percent, then 7.18 percent and 7.14 percent," a Johannesburg debt trader said.

"There's a lot of short-covering in the market. Foreigners are still all over our South African bonds and if demand continues to come through we look to test 7.08 percent soon."

The market is increasingly betting that the Reserve Bank will keep interest rates at 30-year lows for the rest of the year as growth remains hesitant after a recession in 2009. Prospects of a downturn in Europe, a key market for South Africa, will add pressure.

The benchmark JSE Top-40 index of blue-chip stocks ended down 1.21 percent at 27,189.81, a level last seen on June 24, 2010. The broader All-share index came off 1.14 percent to 30,520.43.

"Investors are now worried about economic growth. We saw the ISM data which was not very good for sentiment," Ferdi Heyneke, a portfolio manager at Afrifocus Securities said.

The data showed the U.S. services sector falling in July to its lowest level since February 2010, while new U.S. factory orders fell in June, pulled down by weak demand for transportation equipment.

On the bourse, Kumba Iron Ore topped the decliners' list as demand worries for industrial metals such as copper hit prices.

Kumba, a unit of global mining giant Anglo American, shed 3.95 percent to 483.52 rand and BHP Billiton lost 2.85 percent to 236.08 rand.

Platinum miners such as Anglo American Platinum and Impala Platinum fell between 1 percent and 1.2 percent as their managers begin fresh wage talks to head off a strike.

Sappi was 1.9 percent lower at 28.85 rand after the paper maker said it would finalise the closure of its Port Elizabeth mill to rein in costs.

Gold miners bucked the weaker trend as the price of the metal set a record high, boosting AngloGold Ashanti by 3.69 percent to 300.71 rand and Harmony by 3.02 percent to 99.41 rand.

The rand hit a session low of 6.8440 against the dollar earlier on Wednesday before recovering to 6.7485 by 1614 GMT, up 0.76 percent on the day. But traders said global uncertainly should cap its gains.

"Equities are heading south, so all in all I think it's a fairly bleak outlook on rand in the short term. The 6.72/73 area will be base for now and we could easily have another look up into 6.85," said Duncan Howes, a trader at Absa Capital.