Indian bond prices fall amid central bank's bond sale plan and global sell-off.

India's central bank said it will sell bonds to drain liquidity from the banking system, adding to bond supply in a year when government borrowing is at a record and the market is already under pressure, sending Indian bond prices lower. Local bonds were caught up in a global selloff, with the yield on India's 6.94% bond due 2036 rising 7 basis points to 7.09%, and the yield on the 6.36% bond due 2031 climbing 16 basis points to 6.78%. The Indian rupee weakened in tandem, with high oil prices weighing on the country's finances and the central bank intervening to support the exchange rate. Indian markets were closed Monday for a public holiday. The Reserve Bank of India announced late Friday that it would withdraw 1 trillion rupees from the banking system through bond sales. This is the bank's largest operation to date to absorb excess liquidity in the banking system that poses inflation risks. The fresh bond supply further darkens the outlook for the bond market, while high oil prices raise inflation risks and increase the likelihood that the Reserve Bank of India will raise interest rates next month. The federal government plans to issue nearly 8 trillion rupees of debt over the next six months, a period that is also typically a peak time for local government bond issuance.