The most actively traded bond 8.28%, 2027 yield was 3 bps lower on Monday at 9.08% tracking the rupee's strength in the spot market but fall in yields may be capped ahead of the open market bond buys scheduled later in the session.
USD/INR was trading at 62.80/83 versus its previous close of 63.11/12 following an assurance from Fed Chairman-nominee Janet Yellen there will be no imminent decision to scale back the Fed's massive bond-buying programme.
Market will closely watch outcome of the RBI's Rs 8,000 crore bond purchase through open market operations but traders are wary of its outcome as bonds chosen for OMO auction are illiquid.
Expectation of further OMOs in the coming weeks may support yields, traders said.
The 2027 bond yield seen in 9.05-9.12% band for the session.
The benchmark 10-year bond yield is shut for trading due to coupon payments.
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