Mumbai: Bond yields rose on Friday after results of a Rs150 billion ($3.1 billion) bond auction were in line with market expectations and traders bet on the Reserve Bank of India (RBI) increasing the next auction size.
The yield on the most traded 6.07% bond maturing in 2014 was at 6.43%, above its previous close of 6.37%.
There were no deals in the benchmark 10-year bond in the entire session.
The benchmark five-year interest rate swap ended at 6.06/12%, down from its previous close of 6.21/26%.
Volumes were a moderate Rs57.35 billion ($1.2 billion) on the RBI’s trading platform.
“Auction results were in line with expectations, now the market is awaiting details on the next bond auction,” said Prasanna Patankar, senior vice-president at STCI Primary Dealership.
“There is not much scope for yields to soften,” he said.
Since late May, the government has been increasing the size of weekly bond auctions from what it had indicated in a borrowing schedule. Friday’s auction was almost double the originally scheduled amount of Rs80 billion.
After market hours, a tender for Rs120 billion on 17 July was announced, 20 billion more than had been scheduled.
On Monday, the Union government raised its gross market borrowing target to Rs4.51 trillion for 2009-10 from 3.62 trillion, and the heavy supplies have weighed on sentiment.
Bonds were little moved even as industrial output grew for a second successive month in May as strong domestic demand offset faltering exports, which analysts said added weight to a view the RBI would not cut rates further.