MUMBAI: Indian government bond yields rose for a seventh straight session on Friday as investors sold debt to make space for the latest issuance of $2.1 billion worth of debt while caution also prevailed ahead of US jobs data due later in the day.
Bond yields have now risen for seven out of the last eight weeks as expectations of rate hikes by the central bank amid persistently high retail inflation has hurt the sentiment for debt.
Traders are waiting for the results of the five recently concluded state elections due on Sunday which are expected to show strong support for the main opposition party ahead of the general polls next year.
The main opposition Bharatiya Janata Party (BJP) is perceived by many investors as being more business-friendly, and investors say its good showing in state elections could spark gains in Indian markets.
"Next week direction will be based on the state election results. The US non-farm payrolls is also important and if that data is good, we could see yields rising further next week," said Harish Agarwal, a fixed income dealer with First Rand Bank who expects the new 10-year paper to move in a 8.75 to 9.00 percent range next week.
The benchmark 10-year bond yield closed up 5 basis points at 9.16 percent, while the new 10-year paper ended 7 bps higher at 8.85 percent.
Analysts polled by Reuters expect the US economy to have created 180,000 jobs in November, following 204,000 in the previous month. Any upside surprise will keep alive lingering expectations the Federal Reserve may start to scale back its bond-buying stimulus programme at the Dec. 17-18 meeting.
Such an outcome would hurt the rupee and also weigh on domestic bond prices.
In the overnight indexed swap market, the benchmark five-year swap rate closed 5 bps higher at 8.38 percent, while the one-year rate ended up 4 bps at 8.45 percent.
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