Mumbai: Federal bond yields jumped on Friday after the RBI declared lower-than-expected cut-off prices at an auction of three government securities.
The 10-year benchmark bond yield ended at 6.20%, after spiking from 5.98% before the auction to the day’s high of 6.25%, a level last seen in mid-December 2008.
It had closed at 5.87% on Wednesday after surging 57 basis points in the biggest single-day gain in a decade following a surprise government announcement of extra borrowing.
Volumes were a heavy Rs111.9 billion on the RBI’s trading platform with the 10-year paper being the most heavily traded.
Bond yields have risen 113 bps this week, after having fallen 254 bps in 2008.
RBI set a cut-off price of Rs105.03 at the auction of the 7.59% bonds maturing in 2016.
Only the 2016 bond was fully subscribed while there was a devolvement totaling Rs11.2 billion to primary dealers on the 2023 and 2034 bonds.
Earlier this week, the government said it would issue Rs500 billion of fresh bonds by March.
Dealers said the market would keenly watch Monday’s industrial numbers for further cues and weak data would be positive for bonds with the RBI likely to cut rates again.
“Bond prices will remain subdued next week and the 10-year bond may trade between 6.15-6.40% range,” said Gopal Tripathi, a trader at HDFC Bank.