MUMBAI: India's benchmark 10-year bond snapped a four-day winning streak on Monday, retracing from its 4-month high touched in the previous session, on profit-taking and as an announcement of a new 14-year bond dented appetite for instruments of similar tenures.
The government announced bond sales of 160 billion rupees ($2.74 billion) scheduled for May 30, including 70 billion rupees of a new 14-year bond, during market hours, taking the market by surprise with its timing.
Traders also trimmed holdings ahead of the announcement of key ministerial posts, primarily the appointment of the new finance minister.
Investors also await comments from Narendra Modi, who will be sworn in as the prime minister later in the day.
The market has been factoring in Arun Jaitley as the obvious candidate for finance minister on a list of cabinet members prepared by Modi.
Traders expect bonds to be ranged until clarity emerges on the new government's plan to rein-in in the fiscal deficit, and also for commentary from the Reserve Bank of India in its policy review next week.
"The key concern for the market is the level of fiscal deficit and the quality of the deficit. If the combination is seen as favourable, we are likely to see a further softening of yields," said Badrish Kulhalli, fund manager-fixed income, HDFC Standard Life Insurance Co.
Kulhalli expects the 10-year bond yield in an 8.60-8.75 percent band in the near term.
The benchmark 10-year bond yield closed 3 basis points higher at 8.67 percent.
In the overnight indexed swap market, the benchmark five-year swap rate and the one-year rate both ended up 2 bps each at 8.16 percent and 8.40 percent, respectively.
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