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Bonds fall as low yield deters buyers

Bonds fall as low yield deters buyers

Mumbai: India’s 10-year bonds fell, ending six days of gains, on speculation that yields near the lowest in more than a month encouraged investors to sell debt securities.

The six-day rally that followed the Reserve Bank of India’s (RBI) 29 April decision to leave interest rates unchanged pushed the benchmark yield on Monday to the lowest since 27 March, from a 10-month high touched on 24 April.

Bonds also declined amid concerns that the rise in crude oil prices to a record high will stoke inflation. “The yields fell a bit too much and a bit too fast and they had to settle at some point," said Arun Kaul, treasurer at state-owned Punjab National Bank in New Delhi. “I am cautious now and I see scope for the bond yields to head up." The yield on the 8.24% note due April 2018 climbed 3 basis point, or 0.03 percentage points, to 7.82% at the 5.30 pm close in Mumbai, according to RBI’s trading system. The price slipped 0.1875, or 18.75 paise per Rs100 face amount, to 102.86.

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