Bond yields at 18-month high ahead of debt sale

Ten-year government bonds fell for a fourth day on speculation investors refrained from adding to their holdings before debt sales on Friday.

The yield on the 6.35% note due January 2020 rose 1 basis point to 8.10% at the close of trade on Thursday. The price fell 0.02, or 2 paise per Rs 100 face amount, to 88.43.

Yields climbed to their highest closing level in 18 months as the finance ministry plans to sell Rs 12,000 crore ($2.7 billion) of bonds maturing in 2015, 2020 and 2032. The government plans to raise 63% of its full-year borrowing target of Rs 4.57 lakh crore in the first half of the year that started April 1.

“Supply pressure is persistent and has made portfolio management a lot more difficult and sensitive,” said S Srikumar, a fixed-income trader at Corporation Bank in Mumbai. “The trend in yields will be determined by the outcome of debt sales and economic data.”

The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, increased. The rate, a fixed payment made to receive floating rates, rose to 6.86% from 6.84% on Thursday.

Source: http://economictimes.indiatimes.com/markets/bonds/Bond-yields-at-18-month-high-ahead-of-debt-sale/articleshow/5874716.cms