South African bonds were up to 40 basis points weaker in early trade as risk aversion saw the rand sell off and bonds follow suit.
"The guys are just selling - it is the trend and it is going to be a tough day," said a Johannesburg-based bond dealer.
By 08:35 the short-term government R153 bond was at 9.620% from its previous close of 9.170%. The medium-term R157 was at 9.440% from 9.010% at Wednesday’s close and the long-term R186 was bid at 9.105% from 8.750% before.
The rand was last at 10.3990 per dollar from a previous close of 10.6687.
"We sold off on the back of the rand, which has popped," said the dealer.
In answer to a question on what is causing the radical moves, he uttered the two dreaded words for emerging markets: "Risk aversion."
They are baling from emerging markets, said the dealer.
Dow Jones Newswires reports that the euro dropped sharply against the dollar and the yen in Asia Thursday on mounting worries over the health of Europe’s economies and banking sector as well as the prospect of further interest rate cuts in the continent.
Foreigners were net buyers of 999.884 million rand worth of South African bonds on Wednesday after net purchases of 1.061 billion rand worth of local bonds on Tuesday, Bond Exchange of South Africa statistics show.
Nominal cumulative volume was 61.318 billion rand on Wednesday from 165.673 billion rand on Tuesday.
