South African government bonds were fairly steady on Thursday morning, even as the rand drifted slightly weaker due to risk-off sentiment on global markets.

The yield on the benchmark R186 bond held near its lowest level since early 2015, a day after the tabling of the national budget, which some analysts have said went far enough to avert a sovereign credit rating downgrade.

"The most important day for our local bond market has come and gone. The budget delivered was a strong one, setting out to reduce expenditure and increase revenue," Rand Merchant Bank analyst Gordon Kerr said.

"This combination helps to close the budget deficit and stabilise the debt-to-GDP ratio. Most importantly, the market views this as enough to stave off a rating downgrade from Moody’s at the end of March."

Any further downgrade will condemn SA debt to universal junk status, leading to bond outflows and a weaker rand. S&P Global Ratings and Fitch Ratings already have the country’s credit rating at subinvestment grade.

Delivering the 2018-19 budget speech, Finance Minister Malusi Gigaba said the government would cut spending to the tune of R85.7bn over the next three years.

As predicted, VAT will increase from 14% to 15%, which will raise a further R22.9bn for the fiscus. Gigaba also revised economic growth forecasts upwards, which is also likely to appease rating agencies.

At 9.57am, the yield on the benchmark R186 bond was at 8%, from 7.97%, while the longer-dated R207 was bid at 6.63% from 6.64%.

The rand was at R11.7009 to the dollar from R11.6646.