Indian bond yields in tight band, global cues support
Thursday, 21 October 2010
MUMBAI, Oct 20 (Reuters): Indian federal bonds yields and overnight indexed swaps (OIS) were stuck in a tight band Wednesday as domestic inflation and expectations of a rate increase next month weighed, but global cues were supportive.
US government securities rallied Tuesday as investors, worried about the outcome of the US home foreclosure crisis, sought safe investments and Federal Reserve officials backed the need for easier monetary policy to support the economy.
There were also concerns of a slowdown in Asian economies after the Chinese central bank's surprise rate increase Tuesday, its first in nearly three years. It could mark the start of a more aggressive phase of monetary tightening in the world's fastest-growing major economy. " With China raising rates, concerns of slowdown have emerged as Asian economies have been supporting global growth," said a senior fixed-income trader with a foreign bank.
At 10:49 am (0519 GMT), the benchmark 10-year bond yield was up 3 basis points at 8.11 per cent, after easing to 8.07 per cent. The yield on the most traded 8.13 per cent, 2022 bond was up 1 basis point at 8.11 per cent.
It traded in the band of 8.08-8.13 per cent. Volumes were a moderate 31.50 billion rupees ($711 million) on the central bank's trading platform.
"A 25-basis points rate hike has already been factored (in), but the market will watch weekly inflation data for further cues," said Roy Paul, a deputy general manager at Federal Bank in Mumbai.
The market has been pricing in a quarter percentage point rise in key rates on Nov 2, when the central bank reviews policy, after last Friday's data showed the wholesale price index rose to 8.62 per cent in September from 8.5 per cent in August.
US government securities rallied Tuesday as investors, worried about the outcome of the US home foreclosure crisis, sought safe investments and Federal Reserve officials backed the need for easier monetary policy to support the economy.
There were also concerns of a slowdown in Asian economies after the Chinese central bank's surprise rate increase Tuesday, its first in nearly three years. It could mark the start of a more aggressive phase of monetary tightening in the world's fastest-growing major economy. " With China raising rates, concerns of slowdown have emerged as Asian economies have been supporting global growth," said a senior fixed-income trader with a foreign bank.
At 10:49 am (0519 GMT), the benchmark 10-year bond yield was up 3 basis points at 8.11 per cent, after easing to 8.07 per cent. The yield on the most traded 8.13 per cent, 2022 bond was up 1 basis point at 8.11 per cent.
It traded in the band of 8.08-8.13 per cent. Volumes were a moderate 31.50 billion rupees ($711 million) on the central bank's trading platform.
"A 25-basis points rate hike has already been factored (in), but the market will watch weekly inflation data for further cues," said Roy Paul, a deputy general manager at Federal Bank in Mumbai.
The market has been pricing in a quarter percentage point rise in key rates on Nov 2, when the central bank reviews policy, after last Friday's data showed the wholesale price index rose to 8.62 per cent in September from 8.5 per cent in August.