By Anoop Agrawal Nov. 4 (Bloomberg) -- Indian bonds declined for a second day on speculation some investors sold existing securities to make room for new debt from an auction later this week. Benchmark 10-year notes were set for their biggest two-day loss in three weeks after the government yesterday said it will sell 100 billion rupees ($2.05 billion) of bonds on Nov. 7. Some investors may have sold the securities after yields touched a nine-month low last week, said Jayant Chiney, a treasurer at state-owned Bank of India. ``Investors are going to buy the 10-year bond at a better valuation at the auction, which is what they are pricing in as of now,'' Mumbai-based Chiney said. ``Yields may rise further till the auction.'' The yield on the 8.24 percent note maturing in April 2018 climbed 4 basis points, or 0.04 percentage point, to 7.60 percent as of 10:55 a.m. in Mumbai, according to the central bank's trading system. The price fell 0.30, or 30 paise per 100 rupees face amount, to 104.24. The federal government will sell 60 billion rupees of the 10-year notes and 40 billion rupees of the 8.28 percent debt due 2032 at the auction, the finance ministry said yesterday after trading hours. The government also offered to buy back on Nov. 6 as much as 100 billion rupees of bonds sold earlier under the so-called market stabilization plan. The government will repurchase up to 50 billion rupees each of the 5.48 percent and 6.65 percent notes, both due in 2009. India sold the stabilization bonds to mop up surplus cash injected following currency intervention by the central bank. The Reserve Bank of India's dollar purchases reached $74.9 billion in 2007 as it sought to stem gains in the rupee, and a record $13.63 billion in January alone. To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.

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