JOHANNESBURG (Reuters) - South African benchmark government bonds were firmer in early Thursday trade and held on to recent gains after the 2015 bond hit an all time high in the previous session, while foreign investors showed preference for local debt over U.S. Treasuries. The rand opened weaker against the dollar but was still within the week's range as a risk rally from the previous session abated and investors covered against risk. The stock market looked to open lower. Investors will be looking for indications of the government's fiscal policy when Finance Minister Pravin Gordhan speaks at a presentation of state-owned Land Bank's results at 0930 GMT. The yield on the benchmark 2015 bond was down two basis points to 6.77 percent while that on the longer-dated 2026 bond dropped 2.5 basis points to 8.085 percent. The four-year bond yield is trading at record lows as offshore players pile into South African debt, which is yielding higher returns than developed markets whose interest rates are near zero in several economic powerhouses. Market players see it as unlikely for the South African Reserve Bank to hike interest rates this year, which should push yields even lower. Many are revising forecasts and see the first rate hike in May 2012. The bond market is however over-bought and will likely to see profit taking on the day. "The R157s traded as low as 6.72 but were pushed back at the close due to some small profit-taking. Bonds have rallied lately and we expect to see some lightening of positions," Rand Merchant Bank said in a morning note. Continued...

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