India’s 10-year bonds fell, pushing yields to a two-week high, on speculation investors will sell the securities to free up cash for a debt auction this week. Benchmark yields yesterday surged the most since Jan. 9 after central bank Governor Duvvuri Subbarao said the fiscal deficit may be “substantially higher” than estimates. The comments spurred speculation India may borrow more than planned as policy makers attempt to shield the economy from the global economic slump. “Concerns of higher supply is prompting investors to realign their portfolio,” said Baljinder Singh, a fixed-income trader at state-owned Andhra Bank in Mumbai. “Investors are going to demand a higher premium for the bonds at the auction.” The yield on the 8.24 percent note due April 2018 rose one basis point to 5.98 percent as of 11:42 a.m. in Mumbai, according to the central bank’s trading system. The price declined 0.08, or 8 paise per 100-rupee face amount, to 115.87. The government plans to offer 40 billion rupees ($819 million) of a new 10-year security and 30 billion rupees each of the 7.56 percent bonds due 2014 and the 6.83 percent notes maturing in 2039 at an auction on Jan. 30, the finance ministry said yesterday. Subbarao yesterday said that the government’s borrowing calendar may be adjusted depending on inflows and expenditure. The government has raised 50 billion rupees more than planned this month.

Source