The South African rand and government bonds jumped on Monday after ratings agency Moody's kept the country's last investment-grade credit rating intact, but many investors expected the rally could fade soon.

Moody's decision on Friday to leave South Africa's sovereign debt at Baa3, the lowest rung of investment grade, was a relief to beleaguered President Cyril Ramaphosa, who is battling to stimulate growth in Africa's most advanced economy.

But by revising the outlook on that rating from stable to negative, Moody's sent a warning that a downgrade could follow in the next 12-18 months - or sooner if the government doesn't come up with a credible budget in February.

A downgrade to "junk" status on the local-currency rating could trigger large outflows from South African government bonds, as they would be ejected from the benchmark World Government Bond Index.

At 1500 GMT, the rand traded at 14.80 versus the US dollar, around 1.5% stronger than its previous close.

South Africa's dollar-denominated sovereign bonds surged, with longer-dated issues adding as much as 1.3 cents in the dollar. The yield on the benchmark 2026 rand bond fell 17 basis points to 8.405%, while the Johannesburg Stock Exchange's Top-40 Index saw modest gains of around 0.5%.