South African assets fell on Wednesday when investors were spooked by a ratings outlook downgrade of the domestic economy, which added to market fears over the euro zone debt crisis.
Yields on government debt ended 11 basis points higher on the 2015 issue and jumped 12 points on the 2026 bond partly as the most liquid government bonds reacted to Moody' s rating agency cutting South Africa's A3 rating outlook to negative from stable.
The (outlook) downgrade combined with all of the international factors, is the biggest driver. It's a definite concern for your international investors if you suddenly get a downgrade, said Marten Banninga of World Wide Capital Securities.
I do think there is a possibility you get a relook at South Africa from these international investors, Banninga said.
The local market was also tracking the weakness in euro zone bonds and that region's depressed currency.
The rand gave up 2.8 percent from its previous close to the dollar, trading as low at 8.0360 on the day.
The local unit has managed to hold just below the 8 level in the past sessions but broke through that barrier on Wednesday as investors dumped risk.
Europe's current inability to sort out its debt problems has battered sentiment towards emerging markets and Moody's outlook downgrade, although analysts say it is unlikely to lead to a ratings cut, soured sentiment further.
Gill Marcus will make her sixth and final monetary policy statement at 1300 GMT on Thursday and most of the market sees the rate holding steady.
The MPC committee has one bullet left in the chamber and I don't think they'll use it tomorrow. I think rates will be unchanged, even more so now with Moody's downgrade, said Steve Arnold, a bond trader at Investec Bank.
Arnold said it would be prudent for the central bank's governor Gill Marcus to leave herself ammunition in case of a further deterioration in the European Union.
The futures markets however have priced in some chance of a cut, which could see bonds weaken as long positions unwind if there is not cut.