Gilts down on interest rate outlook

The yield on the benchmark 7.37 per cent 10-year paper (2014) closed at a six-week high of 6.38 per cent today against 6.24 per cent yesterday. Its highest close was 6.65 per cent, recorded on August 11.

The prices of government bonds in the longer term of the maturity fell by almost Re 1 and short- and medium-term paper dipped by almost 70 paise.

A bearish outlook on the interest rate scenario, with inflation still ruling high, is said to be the trigger for today's fall in bond prices.

"Inflation at 7.8 per cent, lack of a clear view on interest rates, and no major buying pressure from the banks made yields go up across maturities," said a dealer.