Ten-year bonds decline before govt debt auction

Ten-year bonds declined for the fourth day in five sessions on speculation demand for existing securities will wane ahead of a debt auction on Friday

The yield on the 7.80% note due May 2020 climbed two basis points to 7.95% at the close of trade on Thursday. The price fell 0.13, or 13 paise per `100 face amount, to 99.02.

The government plans to raise as much as `11,000 crore ($2.5 billion) through the sale of notes due in 2017, 2022 and 2040, according to the finance ministry. The issuance is part of the `4.47-lakh crore borrowing programme for the year ending March 31.

“People won’t take aggressive positions in bonds,” said Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai. “The market probably will remain subdued ahead of the debt sale.”

The cost of one-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, increased. The rate, a fixed payment made to receive floating rates, rose to 6.63% from 6.62% on Wednesday.