 "Government bond yields rise for fourth straight day")
The yield on the 10-year bond ended at 8.77% compared with previous close of 8.72%. The yield had ended at 8.77% last time on May 21.
According to bond traders the yield also rose due to selling pressure ahead of auction of a new 10-year bond.
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“The new 10-year bond may be auctioned this Friday itself. If that happens then 10-year bond will become illiquid. Due to that traders have been selling this paper,” said Balginder Singh, a government bond dealer at Andhra Bank.
However, after market hours the Reserve Bank of India (RBI) announced the Friday's auction schedule according to which the current 10-year bond will be re-issued. RBI also announced the auction of three other bonds totaling to Rs 15,000 crore for this week.
Expectation of monsoon rains staying subdued over the next few weeks also dampened sentiments in the bond market, as it would potentially raise inflationary pressures.
"Global oil prices at $115 a barrel is adding to the uncertainty on inflation and going into the budget, the outlook looks mildly negative from here," said Killol Pandya, a senior fund manager-debt at LIC Nomura Mutual Fund.
Brent crude held near $115 a barrel on Monday, supported by worries about potential disruptions to supply from Iraq where Sunni insurgents took control of strongholds along the border with Syria at the weekend. "Money has been flowing out of mutual funds and with overnight rates being jerky, it has affected liquid funds," added Pandya.
According to traders yields may rise further if the Iraq situation intensifies. However, traders do not see the yield on the 10-year bond touching 9% in the near term.
Besides, the coupon rate on the new 10-year bond is expected at about 25 basis points below the current yield on the 10-year bond due to which the market shall get some support.