Mumbai: Indian federal bonds yields and swap rates climbed on Tuesday after May inflation accelerated faster than expected, cementing expectations of an increase of at least 25 basis points (bps) in the key interest rate at the central bank’s policy review on Thursday.
The Wholesale Price Index rose an annual 9.06% in May, with higher manufacturing prices offsetting slower growth in fuel and food costs.
The 10-year benchmark bond yield closed up 9 bps at 8.33%, after trading in a range of 8.26-8.35% during the session. Total volume on the central bank’s electronic trading platform was at a moderate Rs10,440 crore.
The benchmark five-year swap rate closed up 9 bps at 7.79% and the one-year rate closed up 12 bps at 8.01%.
Traders said a rise in US yields and a rebound in global crude oil prices also hurt sentiment.
US Treasuries fell on Tuesday as signs China may be able to avoid a hard landing boosted equities at the expense of fixed-income but the bonds should find relief from US data expected to come in weaker.
Ten-year Treasury notes were yielding 3.1%, up 3 bps.
Crude futures edged higher on Tuesday after the impact of strong economic data from China was offset by expectation it might act to prevent the economy overheating.