Mumbai: The bond yields and one-year swap rate eased slightly from the day’s peaks on Monday as traders looked at value buying after a spike following the central bank’s surprise interest rate hike on Friday.
The yield on the benchmark 10-year bond ended at 7.61% after rising to 7.65%, its highest since 25 June. It had ended at 7.56% on Friday.
The one-year swap rate closed at 5.64%, off the day’s high of 5.68%, its highest since 19 November 2008. It had closed at 5.41% on Friday.
Volumes were a heavy Rs82.80 billion ($1.8 billion) on the central bank’s trading platform.
“There is clearly some support for the 10-year bond at 7.60-65% levels,” said Sandeep Bagla a senior vice-president at ICICI Securities Primary Dealership.
Traders said the market was largely pricing in a 50 basis point hike in key rates at the central bank’s 27 July policy review.
Analysts said the central bank may follow up with another quarter point hike on 27 July when it is scheduled to review policy, because of concerns about inflation above 10%.
“The one year OIS (overnight indexed swap) may stay in a range as there are expectations for liquidity to improve in July so one does not see any instant gratification in paying right now,” Bagla added.
The bond sale schedule for this week was also closely watched and traders had expected the government to reduce the auction size after it did so last week.
After market hours, the government said it will raise a scheduled Rs120 billion via a bond sale on 9 July.