Indian federal bond yields extended their retreat from two-week highs on Friday, buoyed by easy cash conditions and a fall in oil prices to 1-1/2 year lows that eased some concerns about inflation still being in double digits. At 9:47 am (0417 GMT).
The benchmark 10-year bond yield was at 7.67 percent, four basis points below Thursday's close of 7.71 percent and below a two-week high of 7.74 percent hit earlier this week. Volume was a normal 9.90 billion rupees ($208 million) on the central bank's electronic trading platform, with the 10-year bond being the most actively traded.
"Today's auction is expected to sail through smoothly after the successful buyback yesterday, and that is boosting sentiment a bit," said a senior dealer at a private bank. The central bank bought back intervention bonds worth 100 billion rupees on Thursday, infusing liquidity into the system ahead of Friday's auction of 100 billion rupees of bonds.
It also absorbed 318 billion rupees of cash via its reverse repo auction on Thursday, the largest amount since October 24, reflecting improved cash conditions. India's annual inflation was at 10.72 percent as of October 25, above the median forecast of 10.45 percent, and little changed from the previous week's annual rise of 10.68 percent.
Oil was fell below $50 a barrel for the first time since March 2007 on Friday. India imports a majority of its oil needs and sharp falls in global prices have raised expectations of a local fuel price cut in recent weeks. Britain and Europe slashed interest rates on Thursday amid recession fears deepened by some of the worst US retail sales in decades and an IMF forecast for an economic contraction not seen since World War Two.