MUMBAI: India's benchmark 10-year bond fell on Tuesday, retreating from a one-year high hit in the previous session, as investors booked profits ahead of the government's announcement of its borrowing plans for the second half of the fiscal year.
The 10-year bond yield had touched a one-year low of 8.42 percent on Monday, on hopes the government would cut its borrowing for the remainder of the year ending in March 2015.
Markets are also seen range-bound ahead of the Reserve Bank of India's policy review on Sept. 30. The central bank is expected to keep rates on hold but its statement will be scrutinised.
"I don't see too much of an upside on yields from here and the psychological level for 10-year yield is 8.50 percent, which is unlikely to break unless there's a big negative trigger from RBI policy," said Baljinder Singh, a senior dealer with Andhra Bank.
The 10-year benchmark bond yield ended up 3 basis points at 8.47 versus Monday's close of 8.44 percent.
The total volumes on the electronic trading platform also fell to 253.55 billion rupees ($4.16 billion), much below the average trading volumes in the last three sessions.
The government is due to borrow 2.32 trillion rupees in the second half of the fiscal year, according to its budget, although that could increase to 2.48 trillion rupees to include the 160-billion-rupee cut in the first half of the year.
In the overnight indexed swap market, the benchmark five-year swap rate closed up 3 bps at 7.83 percent, while the one-year rate ended flat at 8.40 percent.
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