Government bonds fell for a fourth straight session on Wednesday in volatile trading, tailing the rupee, which made new lows on fears that foreigners will continue to exit the country as economic challenges mount.
Bond investors remain buffeted by current account deficit worries as foreign investors pull out of emerging markets and by fiscal deficit concerns as the government gets ready to roll out an ambitious food subsidy programme.
The primary concern for bond dealers, however, remains the rupee, which plummeted 3.7% on Wednesday.
Foreign investors have sold nearly $1 billion in eight sessions to Tuesday after having relatively resilient. Dealers say bonds found some support around 9% yield levels as they found them attractive.
“There was clearly a lot of support for the market at 9% yield levels. The RBI has signalled that it wants to keep long-term yields down,” said R Sivakumar, head of fixed income dealing at Axis Mutual Fund.
The benchmark 10-year bond yield rose 18 basis points to 8.96%. It traded in a band of 8.76% to 9.04% during the session. Volumes remained low at Rs 13,680 crore.