Mumbai: Yields for benchmark government bonds fell for the fourth straight week on the back of surplus systemic liquidity, falling US bond yields and aggressive demand for new 10-year benchmark note back home.

A hike in taxes on fuels, which will add to government’s revenue, helped lift sentiment. Traders were also expecting more rounds of “Operation Twists” from the Reserve Bank of India in the days to come.

The benchmark 6.45% bond maturing in 2029 offered 5.97 per cent yield, lowest since January 27, 2009, against 6.03 per cent on Thursday. The yield fell 14 basis points this week, after a 36 basis points decline in last three weeks.

“US bond yields have also come down. The world over, there is risk-off sentiment. That has percolated here,” said Lakshmi Iyer, Chief Investment Officer (debt) & head of products at Kotak Mahindra AMC. “We’ve had excess liquidity for a while now. The strong response for the new 10-year benchmark lends confidence to our bond market. Expectations of fresh announcements of Operation Twist have also helped,” she said.

Banks have been parking their huge excess liquidity with the central bank in recent times, earnings 3.75 per cent reverse repo rate.

The government raised Rs 23,000 crore through a sale of bonds on Friday, higher than the scheduled Rs 19,000 crore. The auction includes new 10-year note that was sold at a cutoff yield of 5.79%, and this bond rallied further in secondary trading and ended at 5.72%.

Market participants are waiting for the much-expected fiscal stimulus package by the government to be rolled out in the coming days to help businesses cushion the economic impact of the coronavirus pandemic.