The Hindu Business Line : Bond yields cross 8 per cent

The yields on the benchmark 10-year government paper crossed the psychologically crucial level of eight per cent, on fears of inflation and on expectations of a rate hike by Reserve Bank of India in July. These levels were last seen in April-May 2002, said dealers.

The cut-off yields announced by the RBI for the two auctions were also higher than the market expectations. The yield on the 7.37 per cent 2014 paper was 7.92 per cent against the expectation of 7.9 per cent. The yield on the 7.94 per cent 2021 paper was 8.46 per cent against the expectation of 8.4 per cent.

The market is expecting inflation, which would be announced on Friday, to touch 5.03, against 4.72 in the previous week, dealers said.

On Thursday, volumes in the bond market were low, at Rs 300-350 crore. "Today people didn't have the confidence to buy. Sentiment among market participants is negative.

The overall feeling is that liquidity may be affected post the auctions," said a bond dealer. The 7.59 per cent-10 year-2016 benchmark paper opened at Rs 97.68 (7.93 per cent YTM) and closed at Rs 97.2 (8 per cent YTM), against the earlier close of Rs 97.83 (7.91 per cent YTM). The 9.39 per cent-5 year-2011 benchmark paper opened at Rs 107.61 (7.54 per cent YTM) and closed at Rs 107.35 (7.6 per cent YTM) against the previous close of Rs 107.67 (7.53 per cent YTM). "The 10-year benchmark could remain in the range of 7.9-8 per cent for some time. Tomorrow's opening will depend on the US yields in the overnight market," said a dealer .