MUMBAI: Indian federal bond yields rose on Wednesday tracking US peers and higher global crude oil prices, while position paring ahead of a $2.4 billion debt sale on Friday also weighed.
At 11:30 a.m. (0600 GMT), the 10-year benchmark bond yield was at 8.33 per cent, up 3 basis points (bps) from its close on Tuesday, after trading in a 8.31-8.33 per cent range so far.
Total volumes on the central bank's electronic trading platform were at a moderate 26.55 billion rupees ($576 million).
The benchmark five-year overnight indexed swap rate was up 5 bps at 6.88 per cent while the one-year rate was 3 bps higher at 7.65 per cent.
"Yields are up on account of higher US yields and crude. Further, the upcoming monetary policy and advance tax outflows around mid-September is hampering sentiment," said Debendra Dash, a fixed-income dealer with Development Credit Bank (DCB), predicting a 8.30-8.34 per cent range for the 10-year yield.
US Treasuries slipped in Asia on Wednesday following news that President Barack Obama will unveil a $300 billion package to create new jobs later in the week.
In Asian trade, the 10-year benchmark US bond yield was at 2.03 per cent, higher than 1.98 per cent in late US trade on Tuesday.
Brent crude rose above $113 a barrel for the second consecutive day on Wednesday on expectations of lower US crude stockpiles after a storm disrupted production in the Gulf of Mexico.
Indian companies will pay advance taxes for the second quarter of 2011/12 around mid-September which could tighten liquidity and weigh on short-end rates.
"Market is mixed about the probability of the rate hike at the policy, but I expect the Reserve Bank of India (RBI) to hold for the time being given the global slowdown," DCB's Dash said.
The RBI will review its policy on Sept. 16 and traders said the finance minister's comments about the need for a pause in rate hikes was helping the market.
India's central bank might not increase its key lending rate further as it would impact growth, the Business Standard newspaper reported on Monday quoting Finance Minister Pranab Mukherjee as saying.
However, some position cutting ahead of the bond auction on Friday weighed on sentiment.
India will sell 110 billion rupees ($2.4 billion) of government bonds on Sept. 9, the government said in a release on Monday. ($1 = 46 rupees)
