MUMBAI: Indian government bonds fell on Friday on caution ahead of the US non-farm payrolls data, although for the week they rose for the first time in three weeks as the rupee stabilised and the country concluded its debt auction for the fiscal year.
If the US economy continues to show moderate growth, the Federal Reserve is expected to continue reducing its size of monthly bond purchases, which has been so far cut twice by $10 billion each to $65 billion.
That could hurt inflows into emerging markets like India.
US employers are expected to have added 185,000 jobs in December, according to a Reuters poll.
"Post the auction today, people started selling as no one wants to carry large positions into the weekend, especially with the jobs data due later today," the head of fixed income trading at a foreign bank said.
"The market will remain rangebound until the retail price inflation data on Wednesday," he added, predicting a range of 8.65 to 8.85 percent for next week.
The benchmark 10-year paper closed up 2 basis points at 8.74 percent after moving in a range of 8.70 percent to 8.75 percent.
Sentiment was also helped after foreign institutional investors bought a net $173.03 million worth of bonds on Thursday after being net sellers in each of the previous sessions in February.
On the week, yields fell 4 basis points, their first weekly fall in three.
A more stable rupee also helped, while the government on Friday concluding its borrowing for the fiscal year ending in March after selling 100 billion rupees ($1.60 billion) worth of bonds.
In the overnight indexed swap market, the benchmark five-year swap rate closed up 1 basis point at 8.40 percent, while the one-year rate ended 1 basis point higher at 8.65 percent.
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