Indian federal bond yields fell on Friday as bullish cutoffs at the country's weekly debt sale signalled good demand ahead of key economic growth data next week. The government sold 150 billion rupees of bonds at lower-than-expected cutoff yields, including benchmark 2022 debt at a bid-to-cover ratio of 2.7.
The good appetite for bonds comes even as the Reserve Bank of India continues to maintain its hawkish stance, with its annual 2011/12 report on Thursday reiterating inflation management remains the cornerstone of its monetary policy. April-June gross domestic product data on August 31 will be key, with much weaker-than-expected numbers expected to increase pressure on the central bank to lower interest rates.
"The market is now basically punting on a soft GDP number. If it dips below 5 percent, we may see a big rally. Other factors are not providing much comfort," said Manish Wadhawan, managing director and head of rates at HSBC in Mumbai. The benchmark 10-year bond yield fell 2 basis points to 8.21 percent from its previous close. Yields fell 3 basis points for the week. Market participants said mutual funds and pension funds have been big buyers of debt in the past few sessions, offsetting some of the concerns about inflation and a spike in crude oil prices that had pressured bonds this week.
However, an easing of oil prices on Friday, combined with falling US Treasury yields, s parked receiving in OIS rates. The country's one-year overnight index swap rate fell 1 basis points to 7.80 percent, while the five-year rate was also 1 bps lower at 7.14 percent. The 1-year rate was up 1 bps on the week, while the 5-year rate was flat, after hitting 1-1/2 month highs on Tuesday.
Comments
Comments are closed.