Indian Bonds Decline as Some Investors Sold Before Debt Sales

May 11 (Bloomberg) -- Indian bonds fell for a third day on speculation some investors sold part of their holdings to raise cash for purchases at bond auctions later this week.

Benchmark 10-year bond yields climbed to the highest level in almost a month before the government’s scheduled sale of 120 billion rupees ($2.4 billion) of debt on May 14, the second this month. India plans to raise a record 2.41 trillion rupees from bond sales in the six months ending Sept. 30 as it increases spending to revive growth in Asia’s third-largest economy.

“The approach is to not hold positions for long because of a large supply,” said S. Srikumar, chief debt trader at state- owned Corporation Bank in Mumbai. “That is going to keep the pressure on yields to rise.”

The yield on the 6.05 percent note due February 2019 rose four basis points to 6.42 percent as of 9:45 a.m. in Mumbai, according to the central bank’s trading system. The price fell 0.26, or 26 paise per 100-rupee face amount, to 97.37. A basis point is 0.01 percentage point.

The 2019 debt’s yield may increase to 6.50 this week, Srikumar said.

The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, was little changed. The rate, a fixed payment made to receive floating rates, was at 5.75 percent.