Bond yields eased on account of short covering. However, yields are seen gyrating in a very thin band as traders await details of the government's 2012/13 borrowing calendar details, which is due next week. On the global front, US Treasury debt prices posted modest gains on Tuesday, but selling still pushed some yields to multi-month highs as traders focused on the idea that a stronger economy could mean quicker inflation and monetary policy tightening sooner than expected.
Meanwhile, Brent crude, pulling back from sharp losses a day earlier, edged towards $125 a barrel on Wednesday, as lower-than-expected US crude stocks and a weaker dollar offset the prospect that top exporter Saudi Arabia would ramp up supply.
The yields on 10-year benchmark 8.79% - 2021 bonds were at 8.39%, down from previous close of 8.41% on Tuesday.
The benchmark five-year interest rate swaps were at 7.56% from its previous close of 7.60% on Tuesday.
The Reserve Bank of India has announced the auction of 91-day and 364-day Government of India Treasury Bills for notified amount of Rs 8,000 crore and Rs 4,000 crore respectively. The auction will be conducted on March 21, 2012 using 'Multiple Price Auction' method.
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