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India 10-Year Bonds Drop a Third Day Before Government Debt Sale

India’s 10-year bonds fell for a third day on speculation demand for the notes will decline as the government plans to sell more similar-maturity debt.

Yields climbed to the highest level since August 2008 after the central bank said yesterday the nation will auction 60 billion rupees ($1.2 billion) of 10-year securities on Nov. 4. The finance ministry raised its bond-sale target for the six months through March 2012 by 32 percent to 2.2 trillion rupees on Sept. 29.

“Investors are probably paring positions in existing 10-year notes to make room for the new bond as that is likely to be more actively traded,” said Anoop Verma, a fixed-income trader at Development Credit Bank in Mumbai. “Debt supplies continue to weigh on the sentiment of traders.”

The yield on the 7.8 percent securities due April 2021 jumped seven basis points, or 0.07 percentage point, to 8.95 percent in Mumbai, according to the central bank’s trading system. The rate earlier touched 9 percent.

The government plans to raise 130 billion rupees selling bonds due in 2018, 2021 and 2027 on Nov. 4, the Reserve Bank of India said in a statement yesterday.

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, rose 4 basis points to 8.20 percent, according to data compiled by Bloomberg.

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