MUMBAI: Indian government bonds fell for a second straight session on Friday as investors sold debt amid the evolving global geo-political rout while some position cutting was also seen ahead of the weekend.
World markets remained under pressure on Friday after the downing of a Malaysian airlines jet at the Ukraine-Russia border, new sanctions on Moscow and unrest in Gaza sent investors scurrying to defensive assets.
The two-day fall wiped out gains earlier this week after data on Monday showed consumer price inflation easing to its lowest since figures were first published in January 2012.
Traders said the domestic bond market will remain in a range in the absence of any fresh domestic triggers but the details of next week's debt sale, due to be announced on Monday evening, will be watched.
The announcement of a new 10-year paper at next week's sale could push up yields in the current benchmark bond, dealers add.
"Barring any domestic triggers we will see the bond market stay in a tight range. 8.72 to 8.80 percent on the current 10-year benchmark will continue to hold," said Bekxy Kuriakose, head of fixed income trading at Principal PNB Asset Management.
The benchmark 10-year bond yield closed 3 basis points higher at 8.77 percent, after moving in a range of 8.74 percent to 8.78 percent during the session.
The yield ended flat for the week.
Brent crude oil climbed above $108 a barrel on Friday, extending sharp gains on heightened geopolitical risk after the downing of a Malaysian jetliner over eastern Ukraine and as Israeli ground troops advanced into Gaza.
Traders cited little impact from comments by India's Finance Minister Arun Jaitley on Friday that interest rates should be reduced should inflation ease.
In the overnight indexed swap market, the benchmark five-year swap rate closed flat at 7.89 percent while the one-year rate also ended steady at 8.40 percent.
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