10-year bonds fell for a second day as some investors sold to buy securities at an auction tomorrow.The yield on the 6.90% note due July 2019 climbed two basis points to 7.29% at the close.
The yield on the benchmark note maturing in 2019 rose, reversing earlier declines, before the sale of Rs 9,000 crore of debt on Friday.
?The supply pressure is big, which is preventing investors from holding positions beyond a short period of time,? said S Srikumar, chief of fixed-income trading at Corporation Bank. ?I am expecting the negative factors to outweigh the positive in the near term.?
The government plans to sell Rs 3,000 crore of the 7.32% note maturing in 2014 and Rs 4,000 crore of the 6.35% note due in 2020 at the auction. It will also sell Rs 2,000 crore of the 7.50% note due 2034.
In the currency market, the rupee pared early losses, helped by a bounceback in stock markets. Rupee closed at 47.03 against the dollar, compared to 47.06 Wednesday.
?The tendency seems to be to stay cautious on the rupee and go long on the dollar unless stop losses get triggered,? said a dealer at a foreign bank. He expects the pair to trade in a 46.85-47.40 range over the next few sessions.
Bonds rose earlier on speculation the central bank will keep interest rates at record lows to support an economic recovery.
The US Federal Reserve reiterated its pledge to keep interest rates near zero for an ?extended period.?
?The attention of policy makers is still towards economic growth, which means that monetary conditions are going to remain in favor of fixed-income securities,? said Devendra Das, bond trader at Development Credit Bank Ltd.