Government bond yields closed steady on Friday ahead of RBI's policy review on Tuesday. Traders have been expecting a rate hike since the wholesale and consumer inflation data two weeks ago accelerated. The market will be paying close attention to the policy statement. Yields could rise a further 10-15 bps if they announce a rate hike, said Pramod Patil, assistant vice president, forex and money markets, at United Overseas Bank.
The benchmark 10-year bond yield closed flat at 8.58%. It moved in a narrow range of 8.57% to 8.61% during the session. On the week, the yield rose 3 bps. Traders expect the 10-year bond yield to hold between 8.55% and 8.65% until the review. In the overnight indexed swap market, the benchmark five-year swap rate closed down 4 bps at 8.19%.