India?s five-year bonds gained the most in three weeks on speculation yields near the highest level in more than eight months will entice investors.
The yield on the 6.07% note due May 2014 fell 11 basis points, or 0.11 percentage point, to 6.76% on Tuesday. The price rose 0.42, or 42 paise per 100-rupee face amount, to 97.12.
Yields on the shorter-maturity note climbed 27 basis points this quarter, compared with a two basis-point increase in the latter. The difference in yields between five- and 10-year securities, or the spread, has shrank to 22 basis points from a seven-year high of 65 basis points reached on July 8, data compiled by Bloomberg show.
The government?s failure to sell any of the $2.5 billion of debt at a planned auction on August 7 drove yields on benchmark notes due 2014 to 6.89% on Monday.
India?s rupee fell on speculation overseas funds will reduce holdings of emerging-market assets after China said today its exports extended a slump and factory output was below forecasts.
The currency dropped to its lowest level in more than a week after foreign funds sold more Indian equities than they bought for a third day in a row on August 7, the longest stretch of net sales in six weeks. The rupee also declined on concern local refiners will boost dollar purchases after crude oil prices rose for the first time in four days, according to Sanjay Arya, treasurer at state-owned Bank of Maharashtra.