Ten-Year Bond Yields Rise Toward Two-Year High as Cash Availability Drops

India’s 10-year bonds fell, pushing yields to a two-year high, on concern an auction of notes by the finance ministry today and sales by state governments next week will further reduce the availability of cash to buy debt.

Banks borrowed an average 485 billion rupees ($10.9 billion) from the central bank’s repurchase auction window each day this month, compared with 251 billion rupees a day in September. India sold 110 billion rupees of bonds due in 2017, 2022 and 2040 today. Investors will make the payment on Oct. 25. Funds in the banking system have dropped after Coal India Ltd.’s initial public offering that ended yesterday, the country’s biggest share sale to date.

The yield on the 7.8 percent note due May 2020 rose seven basis points, or 0.07 percentage point, this week to 8.14 percent as of the 5 p.m. close in Mumbai, according to the central bank’s trading system. The price dropped 47 paise per 100 rupee face amount to 97.77.

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