Yields on the 10-year benchmark government security rose after the announcement that wholesale price index inflation rose to a four-month high of 5.79% in July against 4.86% in the previous month. Inflation increased because of rise in prices of food items, particularly vegetables, fuel and manufactured items.
Yields on the 7.16 -2023-10-year benchmark G-Sec touched a high of 8.55%, after opening at 8.45%. The price touched a low of Rs 90.90, after opening at Rs 91.5.
The rise in bond yields, was also due to the rise in the US Treasury Yields, which added to bearish sentiments, said N S Venkatesh, Head-Treasury, IDBI Bank.
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Bond prices are likely to be under pressure until there is further clarity on the liquidity front, Venkatesh added.
According to Rupa Nitsure, Chief Economist, Bank of Baroda, the Reserve Bank of India is left with limited policy options due to currency risks. Growth in FY '14 may slip below 5% if the same trend continues.