New 10-year bond pricing flags concern of inflation, say dealers

The latest bond coupon at 7.26 per cent is higher than expected

The conservative pricing of the new 10-year benchmark government security -- auctioned for the first time on Friday -- reflects the bond market’s concerns about elevated inflation, further policy tightening, and large debt supply pressure, dealers said. The government auctioned a new 10-year bond maturing in 2032 in the primary market, the coupon for which was set at 7.26 per cent.

The 6.54 per cent 2032 paper, the previous 10-year benchmark paper, also closed at a 7.26 per cent yield on Friday, two basis points higher than Thursday's close. Bond prices and yields move inversely.

The coupon on the new