MUMBAI: Federal bond yields continued to trade lower in afternoon session on Tuesday tracking lower global crude, easing of liquidity situation and on bargain buying after six consecutive days of selling in bonds. At 3 p.m., the 10-year benchmark bond yield was down 2 bps at 8.34 percent. The 10-year yield had risen 12 bps over the last six sessions. The benchmark five-year swap rate edged down 6 bps to 7.75 percent, while the one-year rate dropped 5 bps to 8.02 percent. Oil prices slipped on Tuesday, weighed down by concerns over the outlook for the global economy, the Greek debt crisis and a stronger dollar. Dealers expect demand for bonds from banks to continue because of rules that require them to invest 24 percent of their deposits in government bonds and other approved securities. However, heavy debt supplies this week are seen keeping aggressive buying in check. State governments sold 52.5 billion rupees ($1.2 billion) of bonds on Tuesday, while the government will sell 100 billion rupees of treasury bills on Wednesday ahead of a 120 billion rupees bond sale on Friday. Banks borrowed a net 145.80 billion rupees from the central bank's liquidity adjustment facility, compared with 285.05 billion rupees on Monday, much below 1.05 trillion rupees on Thursday, reflecting some easing in cash conditions.

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