Government bonds fell for a fourth straight session on Monday, hitting their lowest level in four months as investors continued to dump debt to make space for upcoming supplies in a holiday shortened week.
Yields on the benchmark 10-year paper had risen 26 basis points last week, to mark their biggest weekly rise since the week to November 8. Financial markets will remain closed on Tuesday for Ram Navami.
The benchmark 10-year bond yield rose 3 basis points to end at 9.10 per cent, after hitting 9.11 percent its highest level since December 6. Yields moved in a range of 9.03 percent to 9.11 per cent during the session.
Traders say a fall in US yields helped bond yields edge down initially but soon investors cut positions due to the shortened trading week and upcoming supplies on Friday.
RBI will sell four government bonds on Friday and the longest tenure security 8.30 per cent 2042 will be sold for a notified amount of Rs 2,000 crore. In the last auction the longest tenure bond 9.23 per cent 2043 was partially devolved on primary dealers as the street appetite was limited.
"The sharp selling was largely on account of the uncertainty looming ahead of the weekly auction announcement. The holiday tomorrow also prompted position lightening," said Shakti Satapathy, fixed income strategist at AK Capital. "Market would keenly watch out for any news on open market operations. Relentless supplies will mean the 10-year may touch 9.15 percent but with no major negative surprise in the near-future we could see value buying around those levels," he added.
