Johannesburg - South Africa's rand weakened against the dollar on Wednesday and yields on long-dated bonds rose after Finance Minister Pravin Gordhan's Budget did little to ease fears about the country's sluggish economy.

The rand was at 8.8650 to the dollar at 15h21 GMT, 0.5 percent weaker than its close in New York on Tuesday.

It slipped after Gordhan said the government expects its budget deficit to widen slightly to 4.6 percent in the financial year beginning in April, more than the 4.5 percent previously forecast.

Gordhan also cut the growth forecast for this year to 2.7 percent from 3 percent.

The announcement that South Africa plans to issue more domestic debt in the coming fiscal year hit bonds on the long end of the curve, with the yield on the 2026 benchmark issue climbing 6.5 basis points to 7.295 percent.

The yield on the 2041 paper jumped more than 10 basis points to 8.325 percent.

“Generally, it wasn't a good budget for bonds,” said Jonathan Myerson, head of fixed income at Cadiz Asset Management.

“The deficit numbers have deteriorated slightly. Government will borrow more than anticipated in the Medium Term Budget... There’s going to be more issuance in the long end of the yield curve.”

Analysts said the budget had not reduced the risk of another ratings downgrade given South Africa's widening fiscal and current account deficits. South Africa has been downgraded by all three credit rating agencies in recent months.

“At the margin, today's budget was ratings negative - on its own it does not justify further downgrades, but at the same time it also arguably will not allay the concerns of the ratings agencies sufficiently to rule out further downgrades down the line,” said Elna Moolman, an analyst at Renaissance Capital. - Reuters