A nervy environment for global bonds is adding to investor concern about South Africa’s fiscal outlook, pushing the government yield curve near its steepest in a year.

With severe power cuts eroding economic growth, a government wage increase that was higher than budgeted and tax revenue missing targets, bond investors are worried the National Treasury will have to ramp up issuance at a time when global yields are rising, drawing capital away from emerging markets.

That’s weighing on longer-term debt. The spread between bonds maturing in 2044 and 2026 has widened about 65 basis points this year to 345 basis points as yields on the longer-dated securities soared.

South Africa currently sells R3.9 billion ($211 million) of nominal bonds at weekly auctions. The South African Reserve Bank already raised alarm bells earlier this year that there is a growing reluctance from domestic investors to continue absorbing government issuance.

Though August generally sees weaker demand for government issuance, the average bid-to-cover ratio of 2.4 in four sales this month is the lowest for any August going back to at least 2019, based on data compiled by Bloomberg. Demand for 2044 notes at Tuesday’s auction was just 1.7 times the amount on offer, compared with 2.7 for 2032 securities.

“Bonds at the long end of the curve have struggled for demand for some time now, which is unsurprising given South Africa’s growth and fiscal risks,” said Rand Merchant Bank analysts in a note to clients on Wednesday. “Until there is material improvement on those fronts, National Treasury will continue to struggle to auction off long-duration bonds. Putting additional pressure on demand at present are external dynamics pulling capital away from EMs.”

Local bonds have underperformed nearly all emerging-market peers this year, handing investors losses of 7.2% in dollar terms. That compares with the average return of 1.6% for rivals.

Any adjustments to issuance would likely be announced in Finance Minister Enoch Godongwana’s medium-term budget presentation in October. Godongwana flagged in May that the nation’s fiscal position had changed “adversely.”

Deutsche Bank economist Danelee Masia forecasts a tax revenue shortfall this fiscal year of R55 billion, as well as a spending overrun of about R20 billion.

“National Treasury can make up for a shortfall of up to R80 billion,” said Masia in a note to clients on Monday. “However, this would necessitate a more bullish turn in the external environment, which may be the largest risk to the issuance outlook.”