Bond yields edge up on supply, swaps steady
Wednesday, 14 July 2010
MUMBAI, July 13 (Reuters): Bond yields edged up Tuesday as traders weighed a $2.8 billion debt sale this week, but swap rates were steady with June inflation data due Wednesday after a below-than-expected industrial output growth.
Most traders expect the central bank to raise policy rates by another 25 basis points at a scheduled meeting on July 27, taking the increase to a full a percentage point since mid-March to curb inflation pressures.
At 10:21 am, the yield on the benchmark 10-year bond was up one basis point at 7.62 per cent. Volumes were low at 12.15 billion rupees ($259 million) on the central bank's trading platform.
The one-year swap rate was unchanged at 5.69 per cent, while the benchmark five-year swap rate which typically tracks bonds was up three basis points at 6.79 per cent.
"Bonds will move in a narrow band, large moves would depend on liquidity and post inflation depending on how the number is," said a senior trader with a foreign bank. A survey showed the wholesale price index in June probably rose 10.8 per cent from a year earlier, faster than a 10.16 per cent rise in May.
Industrial output grew 11.5 per cent from a year earlier in May, its slowest pace in seven months and lower than market expectations of 16 per cent.
Cash conditions have been tight after cash outflows related to the third generation mobile spectrum and broadband auctions last month. Kotak Mahindra Bank said in a note Monday that a maturing bond would inject about 300 billion rupees into the banking system at the end of July.
It expected the 10-year yield in a range of 7.55-60 per cent this week. The government will auction 50 billion rupees of the 7.46 per cent bonds maturing in 2017 and 50 billion rupees of the 8.20 per cent 2022 bonds on Friday. It will also sell 30 billion rupees of the 8.26 per cent 2027 bonds.
Most traders expect the central bank to raise policy rates by another 25 basis points at a scheduled meeting on July 27, taking the increase to a full a percentage point since mid-March to curb inflation pressures.
At 10:21 am, the yield on the benchmark 10-year bond was up one basis point at 7.62 per cent. Volumes were low at 12.15 billion rupees ($259 million) on the central bank's trading platform.
The one-year swap rate was unchanged at 5.69 per cent, while the benchmark five-year swap rate which typically tracks bonds was up three basis points at 6.79 per cent.
"Bonds will move in a narrow band, large moves would depend on liquidity and post inflation depending on how the number is," said a senior trader with a foreign bank. A survey showed the wholesale price index in June probably rose 10.8 per cent from a year earlier, faster than a 10.16 per cent rise in May.
Industrial output grew 11.5 per cent from a year earlier in May, its slowest pace in seven months and lower than market expectations of 16 per cent.
Cash conditions have been tight after cash outflows related to the third generation mobile spectrum and broadband auctions last month. Kotak Mahindra Bank said in a note Monday that a maturing bond would inject about 300 billion rupees into the banking system at the end of July.
It expected the 10-year yield in a range of 7.55-60 per cent this week. The government will auction 50 billion rupees of the 7.46 per cent bonds maturing in 2017 and 50 billion rupees of the 8.20 per cent 2022 bonds on Friday. It will also sell 30 billion rupees of the 8.26 per cent 2027 bonds.