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Bonds slumped on Tuesday as traders sold heavily ahead of a large supply from state governments due later in the day.
The 10-year benchmark bond yield rose to as much as 7.37 per cent. At 0730 GMT, the paper was trading at 7.35 per cent, and had closed at 7.23 per cent on Monday.
“Stop losses got triggered for banks at 7.28 (per cent) level,” said a senior treasury official at a large state-run bank.
About 13 states will raise Rs 19,700 crore ($3.03 bllion) and subsequently the Central Government will see another Rs 12,000 crore worth of bonds on Friday.
“Given that there is no other way to make profit for some banks, they are taking this opportunity to book profit now, which is also adding to selling pressure,” said another trader.
Meanwhile, the rupee was at 64.92/93 to the dollar from 65.03 on Monday tracking Asians on better risk appetite in the region.
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