Government bonds recovered from a two-month low hit earlier in the session to gain most in two weeks on Friday, although caution is likely to prevail given a lack of significant triggers ahead of the end of the fiscal year in March.
Bond investors are also focusing on cash conditions amid expectations of excise and service tax outflows by the second week of March and advance tax payments later in the month, which will tighten liquidity. The benchmark 10-year bond yield closed 6 bps lower at 8.861%. It rose to 8.94 % in session, a level last seen on December 27. For the week, yields were up 6 bps. Yields rose for the first time in three months, up 9 bps. The benchmark five-year swap rate closed 7 bps lower at 8.54%. Earlier, it rose to 8.63%, its highest since September 4. The one-year rate was 5 bps lower at 8.66%.