Indian bond yields down on global risk averse mood
Thursday, 3 June 2010
MUMBAI, June 2 (Reuters): Indian federal bond yields fell Wednesday, supported by risk averse global sentiment, but concerns about inflation and tight cash conditions limited the drop.
At 11:14 am (0544 GMT), the benchmark 10-year benchmark bond yield was at 7.5 per cent, down one basis point from the close on Tuesday when it had hit 7.63 per cent during trade.
Volume was moderate at $1.6 billion on the central bank's trading platform.
"I don't see yields moving up. Our short-to-medium term view is yields will be lower and may trade in the band of 7.40-7.55 per cent in the week," said Nirav Dalal, head of debt capital markets at Yes Bank in Mumbai.
He said bonds were looking attractive after last month's sell-off and the risk averse sentiment was likely to intensify in the coming weeks.
In May, the 10-year yield had fallen 56 basis points, the largest since the 77-basis-point tumble in April 2009.
"There is a fair bit of concern on liquidity tightness in the next fortnight. But I believe things would get better as market is underestimating government spending in next couple of weeks," Dalal said.
Cash conditions have tightened following an outflow of Rs 677 billion for the third-generation mobile spectrum auctioned by the government, and banks have turned borrowers at the Reserve Bank of India's liquidity window from May 31.
Stubbornly high inflation and the central bank's resolve to stay on course for monetary tightening kept traders wary.
Prime Minister Manmohan Singh said Tuesday inflation remained a problem and would require firm action and added that the country would keep pushing for higher growth.
The central bank governor also said on Tuesday inflation was above its comfort level.
At 11:14 am (0544 GMT), the benchmark 10-year benchmark bond yield was at 7.5 per cent, down one basis point from the close on Tuesday when it had hit 7.63 per cent during trade.
Volume was moderate at $1.6 billion on the central bank's trading platform.
"I don't see yields moving up. Our short-to-medium term view is yields will be lower and may trade in the band of 7.40-7.55 per cent in the week," said Nirav Dalal, head of debt capital markets at Yes Bank in Mumbai.
He said bonds were looking attractive after last month's sell-off and the risk averse sentiment was likely to intensify in the coming weeks.
In May, the 10-year yield had fallen 56 basis points, the largest since the 77-basis-point tumble in April 2009.
"There is a fair bit of concern on liquidity tightness in the next fortnight. But I believe things would get better as market is underestimating government spending in next couple of weeks," Dalal said.
Cash conditions have tightened following an outflow of Rs 677 billion for the third-generation mobile spectrum auctioned by the government, and banks have turned borrowers at the Reserve Bank of India's liquidity window from May 31.
Stubbornly high inflation and the central bank's resolve to stay on course for monetary tightening kept traders wary.
Prime Minister Manmohan Singh said Tuesday inflation remained a problem and would require firm action and added that the country would keep pushing for higher growth.
The central bank governor also said on Tuesday inflation was above its comfort level.