The yield on the most-traded 6.90% note due July 2019 climbed 2 basis points to 7.11% at the close. The 10-year bonds fell for the second time in three days on speculation investors sold securities before a debt auction on Friday.
Yields on the benchmark notes due 2019 reversed an early decline as the government prepares to sell Rs 12,000 crore, Rs 4,000 crore more than planned.
This is the second week the government is raising more debt than planned after canceling a sale in August. The government plans to borrow a record Rs 4.51 lakh crore from the bond market in the fiscal year ending March 31.
?The supply pressure is offsetting any optimism that is being priced in,? said Baljinder Singh, a fixed-income trader at Andhra Bank. ?I am expecting a further rise in yields in the run-up to the auctions.?
Bonds also slipped after the central bank on Thursday purchased fewer-than-planned securities in open-market operations.
The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, was little changed. The rate, a fixed payment made to receive floating rates, was at 6.60%, compared with 6.61% on Wednesday.
Meanwhile, rupee recovered initial losses on Thursday as local shares turned positive in late trade. It ended at 47.95/96 per dollar, a touch stronger than Wednesday?s close of 47.98/48.00, after falling to a low of 48.20 in early deals. The rupee had hit a six-week high of 47.85 on Wednesday.