Indian bond yields fall

Indian federal bond yields fell to a near two-week low on Friday, tracking US peers, as concerns over a global economic slowdown prompted investors to stock on government debt. The sentiment was further aided on hopes that the hazy global outlook could nudge the Indian central bank to soften its aggressive stance.
The 10-year benchmark bond yield ended 9 basis points lower at 8.31 percent, after touching 8.29 percent, its lowest since July 25. Total volumes on the central bank's electronic trading platform were at a high 182.45 billion rupees ($4.08 billion), compared with the usual 90 billion-100 billion rupees normally traded in a day.
"Financial markets are giving us some kind of signal - the way equity markets have fallen, the way commodities are falling, things are looking weak - and the natural corollary is there should be a rally," said Manish Wadhawan, director and head of rates trading at HSBC India.
Benchmark 10-year US Treasury yields hovered around 10-month lows on investor scepticism that European and US policymakers would be able to deal quickly with the debt crisis or shore up stuttering US growth. A softening trend in world commodity prices and emergence of global slowdown concerns could have an impact on the Indian central bank's policy stance, a deputy governor at the central bank Subir Gokarn, who handles monetary policy, said.
The Reserve Bank of India (RBI) raised rates last week by a steeper-than-expected 50 basis points, becoming one of the most aggressive major central banks, having effected 11 rate increases since March 2010. Expectations for interest rate increases in India for the remainder of 2011 have jumped 50 basis points from a previous poll after the central bank raised policy rates last week, a Reuters snap poll found last week.
Indian overnight indexed swap rates also slid tracking government bonds. The benchmark five-year swap ended at 7.25 percent, after falling to 7.22 percent, its lowest since November 26, 2010 and down from Thursday's close of 7.36 percent. The one-year rate ended at 7.97 percent, after falling to 7.93, its lowest since July 21. It had closed at 8.18 percent on Thursday.