Bond yields nudged higher on Thursday as investors braced for a $2.5 billion sale on Friday, but economic concerns following weak monsoon rains limited the drop in bond prices.
The rupee rose after a rally in local shares raised expectations for capital inflows, while the dollar?s weakness in global markets also helped.
It ended at 48.11/12 per dollar, off an intraday peak of 48.05, and about 0.5% stronger than 48.37/38 at close on Wednesday when it dropped during trade to 48.50?its weakest since July 30.
Data showed monsoon rains from June 1 to Aug. 11 were 29 % below average, which could dent a nascent economic recovery and force the central bank to stick to its easy money policy for longer.
The benchmark 10-year bond yield, 6.09% maturing 2019 ended at 7.04%, three basis points above Wednesday?s close. Volumes were moderate at Rs 4,650 crore on the central bank?s trading platform.
?Traders were creating space for the new seven-year bond along with two other papers at tomorrow?s auction,? said Srinivasa Raghavan, treasury head at IDBI Gilts. The 10-year bond should be rangebound tomorrow, between 7 and 7.05%, he added.