10-year bonds gained for the first time in five days on speculation yields near the highest level in three weeks will attract investors.
Federal and state governments plan to sell as much as Rs 19,500 crore of bonds this week, starting their borrowing for the second half of the fiscal year ending March 31. Yields on the benchmark notes, due in 2019, rose to 7.22% on October 1, the highest since September 11.
?Bond yields rose significantly last week and that probably wasn?t driven entirely by fundamentals,? said Sanjay Arya, treasurer at Bank of Maharashtra. ?The market is correcting the levels today.?
The 6.9% bond maturing in 2019 hardened to Rs 98.21 from Rs 97.75 while its yield moved down to 7.16% from 7.22%.
Meanwhile, the rupee rose 0.5% to 47.515 per dollar at the close. The rupee rose for a second day as overseas funds increased purchases of local assets to benefit from growth in Asia?s third-largest economy.
The rupee rose to the highest level in two months after data from the stock market regulator showed global funds bought more Indian equities than they sold for a 16th straight day as of September 30, the longest streak since August 4. The rupee also gained as demand for the greenback was low at the start of the month, according to Sudarshan Bhatt, chief currency trader at Corporation Bank.
?Investors are betting a recovery in the global economy will commence from the region, beginning with India,? Bhatt said. ?That optimism is getting reflected in the rupee?s strength.?