Nov. 17 (Bloomberg) -- South African government bonds gained for a second day amid concern the global financial crisis may jeopardize the government's economic-growth targets, boosting demand for the safest assets.

The advance pushed the 10-year yield to the lowest level in more than a week. The National Treasury last month forecast South Africa's economy would expand 3.7 percent this year, and slow to a rate of 3 percent in 2009. Retail sales fell for a fifth month in September and factory output dropped from August, separate government reports last week showed.

``For a while we thought growth in South Africa would hold up, now there are people saying it could have actually turned negative as early as the third quarter,'' and said Mokgatla Madisha, a bond trader at Investec Asset Management in Cape Town. ``That should make bonds a lot more attractive.''

The yield on the benchmark 13.5 percent security due September 2015 fell 15 basis points to 8.66 percent by 3 p.m. in Johannesburg, the lowest level since Nov. 10. The yield on the 13 percent note maturing in August 2010 slipped 18 basis points to 9.07 percent. Yields move inversely to bond prices.

Bonds also gained as declines in stock markets around the world fueled demand for fixed-income securities. The country's benchmark FTSE/JSE Africa All Share Index fell for a fourth time in five days, losing 3.4 percent.

The rand was at 10.1050 per dollar, from 10.1313 on Nov. 14, after earlier rising as much as 1.5 percent to 9.9783 per dollar.

Commodities Factor

Macquarie First South, a Johannesburg-based brokerage, expects the rand to trade at 9.85 per dollar by year-end, compared with its previous forecast of 8.3 per dollar, with the currency's gains limited by weaker global commodity prices. The price of gold slipped more than 10 percent this year.

South Africa is the world's biggest gold and platinum producer, and the rand often tracks the precious metals' price movements.

``It's only when there are signs of recovering global growth that commodity prices will tick up,'' Macquarie said in a note to clients. ``We expect to see signs of this by late 2009. Since currencies are typically one of the first markets to react, we would expect the rand to start strengthening by mid-2009.''

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

Last Updated: November 17, 2008 08:22 EST