Bond yields traded at the highest in three weeks as the government prepared to sell Rs 10,000 crore of debt later this week. Yields on the most-traded securities due 2019 were at the highest since November 12 on speculation faster growth in Asia?s third-largest economy will prompt the central bank to raise borrowing costs.
?Debt supply has now become a concern because the macro-economic situation is weakening the sentiment for bonds,? said Srinivasa Raghavan, head of treasury in Mumbai at IDBI Gilts Ltd. ?The bias is for yields to rise.? The yield on the 6.9% note due July 2019 was at 7.33% at the close.
RBI governor D Subbarao last week indicated there was a need to end some of the ?unconventional? measures policymakers adopted since October 2008 to accelerate growth. India?s $1.2 trillion economy may grow about 7% in the year to March 31, finance minister Pranab Mukherjee had said in New Delhi after the statistics bureau released data for the quarter ended September 30. Economy grew 7.9% in the period from a year earlier. The systemic liquidity was abundant and the money market rates remained soft. The overnight call rate was seen in a range of 3-3.30%. The amount absorbed under LAF reverse repo operation was noted at Rs 1,18,465 crore.
Meanwhile, rupee fell, reversing earlier gains, on speculation importers used the currency?s rise to a week?s high on Wednesday to buy cheaper foreign exchange.