Indian bond yields eased after the country's first debt auction in the new fiscal year saw strong demand, signalling a robust appetite for debt despite uncertain prospects about whether the central bank would continue to cut interest rates. The yield on the 10-year benchmark bond had risen as much as 12 basis points to 8 percent on Wednesday since the March policy, threatening to erase the entire gains for the year, on lingering concerns the Reserve Bank of India would refrain from cutting interests too much due to high inflation and a record current account deficit.
However, sentiment was boosted on Friday after the auction cut-offs for a 150-billion-rupee ($2.7 billion) bond sale met the market's bullish expectations. The auction was part of the 3.49 trillion rupees worth of debt that the government plans to sell in the April-September period. The benchmark 10-year bond yield closed down 3 basis points at 7.93 percent. In the overnight indexed swap market, the benchmark five-year swap rate and the one-year rate both ended unchanged at 7.21 percent and 7.41 percent, respectively.