MUMBAI: Indian government bonds fell for a second consecutive session on Wednesday, hit by worries the US Federal Reserve would raise interest rates sooner than expected and on watch ahead of consumer price inflation data due out on Friday.
A study by the San Francisco Fed on Monday raised concerns that the US central bank may consider raising interest rates earlier than thought, a move that could dent the hefty foreign inflows into emerging markets seen in recent years.
Broader losses in bonds were capped due to the absence of weekly sale of sovereign debt this week, while analysts were hopeful consumer inflation would ease.
"We may see an upside of only about 2-3 basis points (on the 10-year bond) until Friday since there is no auction this week, and CPI is expected to be on the lower side," said Baljinder Singh, a senior dealer with Andhra Bank.
The 2024 10-year bond yield, which became the
benchmark last month, closed up 2 bps on the day at 8.54 percent.
The yield on the 14-year 2028 bond, which was the second-most traded on the electronic platform on Wednesday, ended up 2 basis points at 8.69 percent.
Bonds fell on concerns the Indian debt markets could lose some of their appeal for foreign investors as US Treasury yields rise.
So far this year, overseas investors have bought $18.19 billion of Indian debt.
Caution also prevailed ahead of India's consumer price inflation data, with a Reuters poll of analysts expecting it to have edged down to 7.80 percent in August from July's 7.96 percent.
Volumes on the electronic trading platform rose to 220 billion rupees ($3.61 billion) compared with 188.17 billion rupees on Tuesday.
In the overnight indexed swap market, the benchmark five-year swap rate ended up 2 bps at 8.02 percent, while the one-year rate also closed 2 bps higher at 8.46 percent.
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