Indian federal bond yields and Overnight Indexed Swap (OIS) rose on Monday after the food, fuel price data on Thursday revived concerns of another round of rate increase in November. The 10-year benchmark bond yield ended up six basis points on the day at 7.91 percent. It rose as high as 7.98 percent in intra-day trade but dealers said it was a mis-hit and the actual high for the day was 7.92 percent.
The benchmark 10-year bond yield is up 4 basis points this week. It rose 30 basis points in the September quarter, its biggest quarterly rise since the December quarter when it rose 52 basis points. The one-year swap was up 8 basis points at 6.55 percent, after rising to 6.56 percent its highest since October 29, 2008.
The benchmark five-year swap was up 10 basis points at 7.11 percent after rising to 7.12 percent, its highest since September 20. The result of the 110 billion rupees bond auction was in line with market expectations. The annual food price inflation continued to quicken in mid-September as heavy rains disrupted supplies and analysts see another rate hike by the year-end to cool prices.
The central bank chief had said last month that inflation would determine its future policy action after it raised its key lending rate, or repo rate, by 125 basis points to 6 percent between March and September. Konar sees the 10 year yield in the range of 7.85-7.95 percent in the coming week.
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