The government bond yields rose to highest in a week with old benchmark bond yield inching up 4 basis points (bps) at 7.40 percent.
The new 10-year bond yield was also 4 bps higher at 7.17 per cent. Continued rupee weakness is leading to worries about funding the current account deficit.
Foreigners may hold back inflows expecting the rupee to weaken further, while outflows may accelerate.
The rupee hit 10-month lows on the back of global dollar strength. Liquidity continued to remain tight in the vicinity of Rs 1 trillion.
Fresh debt supply of Rs 150 billion of government bonds on May 31 is seen pressuring the cash deficit in the banking system more.
Yields on US Treasuries surged to a 13-month peak on Tuesday as stocks hit another record high and investors, worried the US Federal Reserve could slow its massive bond-buying programme, proved reluctant to buy more debt in an auction of two-year notes.
