MUMBAI: India's benchmark 10-year bonds gained in late trade on Thursday, recovering from intraday falls on value-buying, although gains were capped ahead of the 160 billion rupees ($2.72 billion) bond auction on Friday and the central bank's policy review next week.
Traders will also watch the gross domestic product data for January-March on Friday, although investors are more focused on how the Narendra Modi government will revive the economy.
Further ahead, investors will closely examine the government's new budget expected to be unveiled in early or mid-July.
"Market is expecting the borrowing plan to be unchanged and until the Budget I see yields range-bound with buying momentum expected from August," said N.S. Venkatesh, treasurer, IDBI Bank.
The benchmark 10-year bond yield ended down 3 basis points at 8.67 percent.
In the near term, direction will be set by the auction on Friday, which includes a new 14-year bond, as well as the RBI's policy review on June 3.
In the overnight indexed swap market, the benchmark five-year swap rate ended down 3 bps at 8.13 percent and the one-year rate closed 1 bp lower at 8.39 percent.
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