Mumbai: The 10-year bonds fell for the second time in three days on speculation investors sold securities before a debt auction on Friday.
Yields on the benchmark notes due 2019 reversed an early decline as the government prepares to sell Rs12,000 crore of bonds, Rs4,000 crore more than planned.
This is the second week the government is raising more debt than planned after cancelling a sale in August.
The government plans to borrow a record Rs4.51 trillion from the bond market in the fiscal year ending March 31.
“The supply pressure is offsetting any optimism that is being priced in,” said Baljinder Singh, a fixed-income trader at state-owned Andhra Bank in Mumbai.
“I am expecting a further rise in yields in the run-up to the auctions,” Singh added.
The yield on the most-traded 6.9% note due July 2019 climbed two basis points to 7.11% at close in Mumbai, according to the Reserve Bank of India’s (RBI) trading system.
The price fell 0.11, or Re11 per Rs100 face amount, to 98.55. A basis point is one-hundredth of a percentage point.
Bonds also slipped after RBI on Thursday purchased fewer than planned securities in open-market operations.
RBI of India bought Rs1,970 crore billion of existing debt, less than the planned Rs60,00 crore.
The central bank bought Rs4,525 billion of existing debt in open-market operations on 17 September, following purchases of Rs4,300 crore on 10 September.