10-year bonds fell, driving up yields from their lowest level in more than a week, after RBI governor Duvvuri Subbarao signaled he may need to tighten monetary policy before advanced economies.
Subbarao said on Monday at a banking seminar in Istanbul that he may need to raise interest rates to curb inflation. RBI has held rates at record lows after cutting the benchmarks six times between October 2008 and April 2009 to shield Asia?s third-largest economy from recession.
?It?s the effect of the Istanbul statement,? said Srinivasa Raghavan, head of treasury at IDBI Gilts. ?Inflation will be a big concern for policy makers in the months to come.?
The yield on the 6.9% note due July 2019 climbed 8 bps, to 7.23% at the close. 10-year yields may move between 7.10% and 7.20% in the coming weeks, Raghavan said.
Wholesale prices rose 0.83% in the week to September 19 from a year earlier, after gaining 0.37% in the previous week, according to the government.
Australia?s central bank unexpectedly raised its benchmark interest rate today from 49-year low and signaled further increases in coming months. Reserve Bank of Australia governor Glenn Stevens lifted the overnight cash rate target to 3.25% from 3% in Sydney.
Meanwhile, rupee rose to a one-year high after the central bank signaled it may start to raise interest rates to damp inflation, boosting the appeal of the nation?s high-yielding assets.