Indian bond yields ended up on Thursday, after higher-than-expected inflation sparked concerns of more monetary tightening and traders awaited new bond issues in the new fiscal.
The yield on the 10-year bond ended at 8.2%, off an intraday low of 8.15%, but up from 8.16% at the last close.
It had hit 8.22% on Tuesday, the highest since early August, after the central bank tightened rates last week.
The bond market is closed on Friday for a holiday.
Wholesale price inflation rose 6.39% in the 12 months to 24 March, higher than the 6.29% forecast.
The data sparked speculation the Reserve Bank of India (RBI) may raise rates when it reviews policy on 24 April.
RBI has forecast an inflation band of 5.0-5.5% for the last fiscal. Last week, it increased its short-term lending repo rate by 25 basis points to 7.75% and raised the cash reserve ratio (CRR)—the proportion of deposits that banks must hold in reserve—for the third time in four months.
“The inflation figure has made the possibility of monetary tightening more certain,” a foreign bank trader said.
Overnight cash rates, an indicator of cash surpluses in the banking system ended at 7.0/7.25% on Thursday, well below a 10-year high of 80% hit last week.
Traders said new issues and the impact of the CRR increase may once again push up overnight rates. The two-stage CRR increase, which takes effect on 14 April and 28, will drain Rs15, 500 crore from the banking system.