Bonds close steady; supply fears remain

Bond yields and overnight indexed swaps (OIS) ended largely steady on Tuesday, with Friday's $2.2-billion bond sale providing an upward bias.

"People don't have bonds in their trading books to sell and no one has a positive view. There was no auction last week, so trading stock outstanding is not so high," said Anindya Das Gupta, head of treasury at Barclays Capital.

Traders expect the central bank to raise key rates further in its March 17 policy, topping up last week's quarter percentage point rate hike, to clamp down on surging inflation.

The yield on the most-traded 8.13% 2022 Indian bond was at 8.18%, up 1 basis point from Monday's close after trading in a narrow 8.17-8.19% range intra-day.

The less liquid 10-year bond yield was at 8.15% up 1 bp from Monday.

Volumes were at 5,440 crore ($1.2 billion) on the central bank's trading platform.

The government plans to sell 3,000 crore each of 7.17% 2015 and 8.30% 2040 bonds and 4,000 crore of 8.13% 2022 bonds on Friday.

The central bank will also auction 6,500 crore of treasury bills on Wednesday.

The one-year overnight indexed swap ended down 1 bp at 7.41% and the benchmark five-year swap closed up 2 bps at 7.99%.