India’s bonds fell, pushing yields to the highest level in a week, on speculation investors will pare holdings before a sale of government debt later this week. The yield on the benchmark 10-year notes approached a three-month high, supported by this year’s four interest-rate increases that were aimed at cooling inflation, according to S. Srikumar, a fixed-income trader at state-owned Corporation Bank. India plans to raise as much as 120 billion rupees ($2.6 billion) selling bonds maturing in 2017, 2022 and 2040 at an auction on Aug. 20, the finance ministry said yesterday. “The outlook on the macroeconomic situation is not encouraging enough to attract investors to securities,” Mumbai- based Srikumar said. “Yields may remain under pressure to rise in the immediate term.” The rate on the 7.80 percent note due in May 2020 rose three basis points, or 0.03 percentage point, to 7.85 percent as of the 9:30 a.m. in Mumbai, according to the central bank’s trading system. It reached 7.91 percent on Aug. 5, the highest level since the security was issued on May 3. India’s Aug. 20 debt sale is part of the government’s record 4.57 trillion rupee borrowing program for the fiscal year that began April 1. The benchmark wholesale-price index rose 9.97 percent from a year earlier in July, following five months of increases that exceeded 10 percent, the government said yesterday. The cost of one-year interest-rate swaps, derivative contracts used to guard against fluctuations in borrowing costs, rebounded from its lowest level in more than two weeks. The rate, a fixed payment made to receive floating rates, rose to 6.19 percent from 6.17 percent yesterday. To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.

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