South African bonds had hardly moved by Friday afternoon, even though the rand had lost further ground against major currencies.

Analysts say the next big catalyst to shake the market in either direction will be the budget, which Finance Minister Malusi Gigaba is set to present on February 21. Shortly thereafter, the result of a ratings review by Moody’s Investors Service is expected.

SA’s investment-grade debt rating hangs by a thread, after S&P Global Ratings and Fitch reduced the country to junk status in 2017.

If Moody’s also pulls the trigger on the rating, the result will be universal junk status for SA’s debt, which will trigger outflows from the bond market. That would have the potential to weaken the rand significantly.

The exact extent of the damage in the event of a Moody’s downgrade remains unclear at this stage, a point reinforced by the Reserve Bank on Thursday when it kept interest rates on hold.

At 4.12pm‚ the R186 was bid at 8.500% from 8.485% and the R207 at 7.135% from 7.140%.

The rand was at R12.2137 to the dollar from R12.1312.

The yield on the US 10-year note was last at 2.6179%, its highest level since March 2017.

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