Inflation blues bleed bonds

The benchmark notes declined for a second day, adding to the biggest quarterly loss in at least seven years, after crude oil reached an all-time high of $143.67 a barrel yesterday in New York. The commodity's price has almost doubled in the past 12 months.

Bonds dropped on speculation the central bank, which raised its benchmark rate to a six-year high last week, will take more steps to cap prices at its meeting on July 29.

"Inflation jitters haven't worn off,'' said Anoop Verma, a fixed income trader at Development Credit Bank in Mumbai. "Some people in the market are expecting further monetary measures to be announced at the policy meeting this month.''

The yield on the 8.24 per cent note due April 2018 climbed 6 basis points to 8.75 per cent, the highest since 2001, at the 5:30 pm close of trading in Mumbai, according to the central bank's trading system. The price of the note fell 0.38, or 38 paise to Rs 96.65.

The benchmark yield climbed 74 basis points in the quarter ended yesterday, the most in at least seven years, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.