Bond yields rose on Monday to their highest in 2009 on supply concerns, although they could get some support from a change in accounting rules that could increase debt demand from primarydealers.
There was little impact from data showing the economy grew 6.1% in the June quarter from a year earlier, in line with expectations.
The 10-year benchmark bond yield, 6.90% bond maturing 2019 ended at 7.44%, up 10 bps from Friday. It rose to 7.45% during trade, its highest since Nov 19.
?Yields are up mainly on supply concerns, but the central bank has said they would give some concessions to primary dealers which may create some demand for bonds,? said Sanjay Arya, deputy general manager of treasury at Bank of Maharashtra.
The central bank on Monday allowed primary dealers to put some of their bond portfolio in a hold-to-maturity account that does not have to be marked to market.
The benchmark five-year interest rate swap ended at 6.38/43%, from previous close of 6.40/45% in low volume trade.
The central bank will auction Rs 6,000 crore of treasury bills on Wednesday and Rs 12,000 crore of bonds on Friday.
?The market is worried about the quantum of additional paper and the outlook continues to be bearish,? Arya said.
?Looking at the interest rate futures prices, it seems that the market is betting on higher yields and looks like the outlook is bearish there also,?Arya said.