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By Sujata Rao and Karin Strohecker

LONDON, Nov 23 (Reuters) - South Africa's deeper descent into junk-credit territory and ejection from major global debt indexes seem to be accepted as a done deal before they actually happen, bond yields and default insurance costs suggest.

Africa's most industrialised country risks downgrades on its local currency debt rating from Moody's and S&P Global on Friday. Both rate it on their lowest investment grade rung of Baa3/BBB-minus.

A cut by both agencies would see South Africa's $125 billion debt market lose its place in the World Government Bond Index and the Barclays Bloomberg index. That would in turn force index-tracking and rating-constrained funds to sell more than $10 billion in debt, analysts have predicted.

But it would only confirm the view, long held by seasoned emerging bond investors, that the once-prized but inexorably deteriorating emerging market deserves to be treated as junk.

Plagued by corruption, moribund growth, refusal to embrace reform and - most recently - by a budget deficit blowout revealed by Finance Minister Malusi Gigaba, South African 10-year bonds yield over 9 percent.

That is well above Indonesia, Romania or Hungary, which carry the same rating from Moody's.

The cost of insuring exposure to South Africa's debt via credit default swaps (CDS) is also higher than peers with the same Moody's rating. Its five-year CDS spread is double Indonesia's for instance.

"If you look at external debt spreads and CDS, that's pretty much bang on where the average BB credit trades. It's trickier to compare on the local side, but nonetheless it's cheap... real yields are among the highest in EM," said Paul Greer, senior trader at Fidelity International.

A CDS-based model from S&P Capital shows markets pricing a two-notch downgrade, treating South African foreign debt - downgraded to junk earlier this year - as if it were BB- rather than BB+, as this graphic shows:

Correspondingly, South African dollar bonds pay an average premium of 287 basis points over Treasuries, while Indonesia pays 173 bps.

"It feels like time has run out," said Sailesh Lad, senior portfolio manager at AXA Investment Managers who is "underweight" South African debt in his portfolio.

"The budget tells you the debt dynamics are on a worsening trend, the finance minister has not delivered what was anticipated."

Gigaba in October slashed growth forecasts and hiked his budget deficit to 4.3 percent of gross domestic product from 3.1 percent in April, pencilling in a big rise in borrowing.