Bond yields fall ahead of RBI debt purchase

The government bond yields fell for a second session on Monday after a finance ministry source said the government will allow foreigners to buy more debt and on hopes the central bank's offer to buy debt will be a success.

The limit on foreign investments in government and corporate bonds will be raised by $5 billion each, a finance ministry official said, in a move intended to attract more funds into the country.

The government bond limits drew good response at a recent auction for foreign investors, and the additional limits are expected to boost demand.

The benchmark 10-year bond yield ended 1 bps lower at 8.17%. It traded in a 8.16-8.17%band in the session. The RBI will revisit its strategy of aiming for a medium term inflation rate of 5% or lower, its governor Duvvuri Subbarao said.

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