The 10-year bonds fell, pushing yields to the highest in more than a month, on speculation some investors will pare holdings to free up cash for purchases at a government debt auction this week.The yield on the 6.90% note due July 2019 climbed 1 bp to 7.41% at the close.
The government will sell Rs 10,000 crore of bonds maturing in 2016, 2019 and 2032 on October 23, the third sale for the second half of the fiscal year ending March 31. It plans to borrow a record Rs 4.51 lakh crore during the year. ?Investors are adjusting portfolios before the debt sale, which is why we are seeing sporadic sales,? said Devendra Das, a fixed-income trader at Development Credit Bank. ?I expect yields to rise further in the next few days.?
Bonds also declined on speculation crude oil prices near the highest level in a year will stoke inflation. The commodity, which was traded above $80 per barrel today for the first time since October 14, 2008, has gained 78% this year.
The South Asian nation?s benchmark wholesale-price index rose 0.92% in the week ended Oct 3 from a year earlier, the most since May, the commerce ministry said October 15.
Meanwhile, rupee strengthened, helped by the dollar’s weakness overseas, but demand for the U.S currency by crude refiners to pay for imports checked the rise.
It ended at 46.11/12 per dollar, about 0.4% stronger than Friday’s close of 46.29/30. It touched an intraday low of 46.20, after having hit the day’s high of 45.94 in early trade. The dollar touched a 14-month low against a basket of currencies on Tuesday on policymakers’ comments.