Some of the spending will have to be done through borrowing and that means it will affect demand for bonds adversely, said Roy Paul, a deputy general manager at Federal Bank in Mumbai. I expect yields to move up further.
The yield on the 8.79% bonds due November 2021 rose two basis points to 8.83% in Mumbai, according to the central banks trading system. The yield may rise to 8.9% in two weeks, Paul said.
The cost of one-year interest-rate swaps rose one basis point to 8.13%.