Bond yields traded in a thin band on Wednesday due to a lack of fresh cues, with traders waiting to see how the demand for debt would be at Friday’s auction. The yield on the benchmark 10-year bond, 6.90% maturing 2019 ended at 6.91%, above Tuesday’s closing of 6.89%. It traded in a narrow 6.88-6.91% range. The rupee declined 0.5% to 48.425 against the dollar at the close.
The government will sell Rs 12,000 crore of bonds on Friday as part of its revised first half borrowing plan of Rs 2.99 trn. The RBI, in its review on Tuesday, said it would actively manage liquidity to facilitate a record Rs 4.51 trn borrowing in 2009/10.
Analysts see a growing risk of a rate increase in early 2010 once recovery takes hold.