2012.05.02 06:25:10 MARKET TALK: India Bonds Down; New Benchmark Paper Eyed

0425 GMT [Dow Jones] India government bonds are down as dealers continue to exit the 10-year note on expectations it will soon be replaced by a new benchmark bond, says a senior dealer with a privately-run bank. The benchmark 8.79% 2021 bond is at 100.60 vs 100.76 at Monday's close. The market was shut on Tuesday for a local holiday. "Liquidity deficit is still hovering around INR1 trillion, and both 10-year and 13-year notes have touched the unstated limit of illiquidity, and may continue to see selling pressure till the auction," he says. The central bank doesn't set any limit on issuance under a bond but a paper tends to become illiquid if the issuance under it is between INR600 billion and INR700 billion. The issuance under both papers have touched INR700 billion. The dealer tips the yields on the 10-year note to be in a 8.65%-8.75% range in the session. (nupur.acharya@dowjones.com) Contact us in Singapore. 65 64154 140; MarketTalk@dowjones.com (END) Dow Jones Newswires May 02, 2012 00:25 ET (04:25 GMT)