Indian federal bond yields rose on Friday after the cut-off yield at a $2.5 billion sale was set higher than expected and a seven-year paper devolved on primary dealers, indicating waning investor appetite. The 10-year benchmark bond yield ended at the day's high of 7.11 percent, up from 7.04 percent on Thursday.
The yield has risen 8 basis points this week and 11 basis points this month Volumes were heavy at 55.35 billion rupees ($1.15 billion) on the central bank's trading platform. The yield cut-offs for two of the three bonds at the 120-billion-rupee auction were higher than market expectations and a development in the new seven-year bond also hurt sentiment.
"Appetite for auction papers is an issue with so much supply hitting the markets every week and there are no fresh triggers which can take the prices up," she said and estimated the benchmark bond touching 7.20-7.25 percent in one month The government aims to sell 4.51 trillion rupees of bonds in 2009/10 and expects to complete 66 percent of this in the six months ending September.
The outlook for farm output is a concern due to weak monsoon and price pressures could build up at some stage but it is too early to take action on inflation, the central bank chief said on Friday. The benchmark five-year interest rate swap ended at 6.40/45 percent, steady at its previous close.
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