MUMBAI: Indian government bonds snapped a two-day winning streak on Friday as investors booked profits following the 150 billion rupees ($2.41 billion) debt sale, but yields are expected to remain in a tight range until the end of the year.
The benchmark 10-year bond yield had dropped 19 basis points over the last two sessions following the central bank's unexpected move to keep interest rates unchanged at its mid-quarter monetary policy review, despite high inflation.
Investors started selling debt immediately after getting allocations at the 150-billion-rupee debt sale which saw cut-off yields come in largely in line with market expectations.
"There is nothing major happening next week so market will remain rangebound. The 10-year paper is likely to move in a 8.70 to 8.85 percent range," said Bekxy Kuriakose, head of fixed income at Principal PNB Asset Management.
The benchmark 10-year bond yield closed up 6 basis points at 8.80 percent after moving in a range of 8.74 to 8.80 percent during the day.
On the week, the yield dropped 11 bps after falling 6 bps in the previous week to mark its second weekly decline.
Traders said they expect bonds to remain rangebound until the year-end as the next key trigger is likely to be the December inflation data which will be released only in mid-January.
Investors will continue to monitor movements in the rupee to gauge if there is any larger impact after the US Federal Reserve on Wednesday announced a limited wind down in bond purchases. The impact on domestic markets have so far been limited.
In the overnight indexed swap market, the benchmark five-year swap rate closed up 1 bp at 8.37 percent while the one-year rate also ended 1 bp higher at 8.42 percent.
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