Mumbai: Indian federal bond yields were steady on Tuesday, 3 June, with investors on the sidelines ahead of auctions later this week and wary about a possible policy response to contain high inflation.
At 10:10am, the 10-year benchmark bond yield was at 8.09%, unchanged from Monday’s close. It hit a one-month high of 8.12% last week. Volume was a low Rs4 billion ($94 million).
“Investors are wondering how liquidity will pan by the end of this week,” a trader with a foreign bank said.
The Reserve Bank of India will auction Rs40 billion of treasury bills on Wednesday and Rs100 billion of bonds on Friday.
Overnight cash rates traded at 6.05-6.10%, which traders said indicated adequate cash conditions due to a pickup in government spending.
Sentiment was cautious about inflation inching up in the coming weeks and upward revision of past data, which could trigger more tightening measures from the central bank.
Government data on Friday showed India’s wholesale price index rose 8.1% in the 12 months to 17 May, the highest since September 2004 and up from the previous week’s 7.82% rise.
The RBI has left its key lending rate, the repo rate, unchanged at 7.75% for more than a year.
Instead it has been tightening cash conditions over the past 18 months, most recently in April and May, when it raised the banks’ cash reserve requirement by 75 basis points to a seven-year high of 8.25%.