MUMBAI: India's benchmark 10-year bonds snapped a four-day winning streak on Friday as investors pared positions ahead of the weekend, with the uptick in global crude oil prices and the rise in US treasury yields hitting sentiment early on.
Bonds were however supported by gains in the rupee which helped limit the rise in yields.
Brent crude rose more than a dollar to above $87 a barrel, bouncing from near four-year lows as investors bought back into a market they said was oversold in the short term.
Bond traders however said they expect sentiment to remain positive in the near-term after domestic retail and wholesale inflation fell. The outcome of two key state elections due on Sunday will also play a key role in bond movements next week, they said.
"State election results are expected to be positive for the BJP (Bharatiya Janata Party); it would be easier to pass a few crucial bills," said Paresh Nayar, head of fixed income and currencies at First Rand Bank. "Next week will also be a thin market and hence trading could be choppy with the 10-year bond yield holding between 8.30 and 8.40 percent," he added. Markets will be shut next Thursday and Friday to mark local holidays.
The benchmark 10-year bond yield ended up 2 basis points at 8.39 percent.
The yield had touched an intra-day low of 8.3449 percent on Thursday, its lowest since Sept. 5, 2013.
On the week however, yields fell 7 basis points, its second straight weekly fall and its biggest in nearly two months. Some fall in bonds was also seen followwing the results of the 150 billion rupees debt sale as some investors who were allotted the debt offloaded a part of their holdings in the market.
Dealers will continue to monitor moves in global crude prices and US yields for near-term direction. US Treasuries prices fell on Thursday on profit-taking after the prior day's rally as Wall Street stocks steadied.
In the overnight indexed swap market, the benchmark five-year swap rate ended up 3 bps at 7.54 percent while the one-year rate closed 4 bps higher at 8.21 percent.
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