Indian federal bond yields ended up on Friday after cut-off yields at a $2.7 billion bond sale were higher -than forecast, and traders expect the volatility in global commodity prices and expectations of more rate increases to continue to weigh. The yield on the 10-year benchmark bond ended at 8.27 percent, after touching a high of 8.30 earlier in the day. It had ended at 8.21 percent on Thursday.
The yield on the second most-traded 8.13 percent, 2022 bond ended 6 basis points higher at 8.42, after rising to 8.43 percent during the day. Total volumes on the central bank's electronic trading platform were 73.05 billion rupees compared with the usual 80 billion rupees to 100 billion rupees. India's central bank set a cut-off price of 96.72 rupees at the auction of the 7.80 percent, 2021 bonds, yielding 8.2902 percent. The yield is higher than a forecast 8.23 percent in a Reuters poll earlier in the day.
"We are not clear which way the interest rates are going. A lot also depends on which way commodities pan out. It is difficult times, the market is extremely volatile," said Sandeep Bagla, senior vice president at ICICI Securities Primary Dealership in Mumbai.
The market is broadly expecting a 25 basis points rate tightening by the central bank on June 16 when it will review its policy to tame high inflation. Last week, the Reserve Bank of India lifted key rates more than expected. The market will also watch for any decision on domestic fuel price rise as it would impact inflation.
A ministerial panel to consider raising domestic fuel prices may meet on May 17 or 18, Oil Minister S. Jaipal Reddy said on Tuesday. India's benchmark five-year swap rate ended at 8.18 percent, after falling to 8.16, its lowest since April 15. It had closed at 8.23 percent on Thursday. The one-year rate closed unchanged at 8.03 percent.