South Africa's central bank is worried that a sharp weakening of bonds and pending ratings decisions could badly affect investor sentiment towards the country while increasing the cost of funding government debt.
South African Reserve Bank's Deputy Governor Daniel Mminele said Standard & Poor's decision to revise the ratings outlook in Africa's most industrialised economy to negative in December had contributed to the sharp fall in local assets.
This had been worsened by the surprise firing of the finance minister shortly after, he said at a conference.
South Africa's benchmark bonds deteriorated sharply in early 2016, Mminele said, which had also led to the rand's weakening.
"Such pronounced weakening of bonds is of concern as the cost of funding government increases, but it also seems to reflect a steady deterioration in real money investor confidence," Mminele said.
"The changes in the Ministry of Finance shortly after the ratings action, drew an adverse reaction from the markets and contributed to further significant depreciation," he said.
President Jacob Zuma alarmed investors and caused the rand to tumble in December when he first replaced the former finance minister Nhlanhla Nene with David van Rooyen, a little-known politician with no financial background.
Under a barrage of criticism and a selling frenzy in the markets, Zuma replaced van Rooyen just days later with Pravin Gordhan, who returned to the job he had held from 2009 to 2014.
Mminele said the decision by the ratings firms likely would have an important effect on asset prices in South Africa.
Ratings firms Standard & Poor's and Fitch both have South Africa's debt just one level above subinvestment, while Moody's has the country two steps above junk, with possible downgrades imminent by mid-year as the country struggles to boost growth.
Investors have expressed concern that further policy uncertainty could lead to a ratings downgrade, potentially into "junk" territory, and raise borrowing costs.
The rand currency has recovered, rising to its firmest in four months on Monday, and has traded near that level this week as increased risk appetite lifted emerging markets. The rand traded at 14.3280 versus the dollar at 1855 GMT.
Speaking during an interview on CNBC Africa, the governor of the SARB, Lesetja Kganyago, said the successful issuance of a $1.25 billion 10-year bond, with a coupon of 4.875 percent earlier this month was a sign of confidence in the country.
"If you wanted evidence, I think that the most recent bond placement by the National Treasury, which was way oversubscribed tells you something, that we have actually able to get the investor community re-interested in South Africa," he said.