India’s 12-year bonds fell for a second day on speculation investors will sell existing notes to make room for purchases when the government issues a new 10-year benchmark security.
The yield on the most-traded notes climbed to a one-week high as a finance ministry official said a new 2022 bond may be auctioned as early as in two weeks, asking not to be identified as the information isn’t public. Bonds gained earlier on optimism a decline in oil prices will help ease inflation.
“The plan to issue a new security means interest in existing securities would fade and demand would drop,” said R.S. Chauhan, Mumbai-based chief dealer for debt and currencies at State Bank of Bikaner & Jaipur. “Yields may harden till it’s known what the government’s borrowing plans are.”
The yield on the 9.15 percent note due November 2024 added one basis point, or 0.01 percentage point, to 8.70 percent in Mumbai, according to the central bank’s trading system. That’s the highest level since April 30. It dropped to as low as 8.63 percent earlier.
The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, fell three basis points today to 8.04 percent, according to data compiled by Bloomberg.