Bonds fell for a second day, driving up 10-year yields to the highest level in a month, on speculation investors are demanding higher interest rates to absorb record supply from the government.
India plans to sell Rs 10,000 crore of debt at an auction on October 16 as part of its plan to borrow an all-time high Rs 4.51 lakh crore in the fiscal ending March 31.
?There?s a clear decline in appetite for debt because of the supply this fiscal,? said Roy Paul, assistant manager of treasury at Federal Bank. ?Sentiment is bearish and is likely to push yields further up.?
The yield on the 6.90% note due July 2019 rose 3 bps, to 7.36% at the close. Yields may reach 7.5% in a few days, Paul forecasted.
Output at India?s factories, utilities and mines jumped 10.4% in August from a year earlier after gaining a revised 7.2% in July, the statistics agency said.
The rupee slid in tandem with emerging-market currencies across Asia after the Dollar Index, which tracks the greenback against the currencies of six major US trading partners, climbed 0.6% on October 9, the day after the measure sank to a 14-month low. Higher crude oil prices may boost the cost of imports for the nation?s refiners.
?The rupee looks set for a modest weakening, as importers may increase dollar purchases,? said Paul. The rupee fell 0.2% to 46.495 per dollar at the close.