10-year bonds fell for a fourth day on speculation increasing government debt sales will reduce demand for the securities.
The yield on the benchmark note maturing in 2019 rose to 7.22%, the highest since September 11, after the government said September 29 it will sell between Rs 9,000-10,000 crore of debt a week until early February.
?The outlook for the bond market remains rather bearish because debt supply will continue to remain high in the foreseeable future,? said Roy Paul, assistant manager of treasury at Federal Bank. The yield on the 6.9% note due July 2019 climbed 3 bps, to 7.22% at the close.
?We will, as in the past, manage the government borrowing programme to the best of our abilities and ensure that the markets function in an orderly manner,? RBI governor Duvvuri Subbarao said in Gangtok on Friday.
The central bank will hold the so-called open-market auctions when appropriate to buy existing debt and inject money into the financial system, Subbarao said.
Meanwhile, rupee rose to its highest in nearly two months as exporters dumped dollars on a view that improving growth and robust foreign inflows would see the local unit strengthen in coming months.