Indian bonds post worst weekly loss in three weeks, end steady
The benchmark 10-year bond rose to 8.84% intra-day, its highest level in seven weeks, before ending at 8.77%
Mumbai: Indian government bonds ended steady on Friday but posted their worst weekly loss in three weeks as doubts persisted over whether the government would be able to meet the ambitious fiscal deficit and growth targets set in its budget.
The benchmark 10-year bond also hit its highest level in seven weeks on Friday, a day after the government laid out a fiscal deficit target of 4.1% of the gross domestic product (GDP) for fiscal 2014/15, but did not spell out clearly how this number was to be achieved.
Analysts said bonds could see a rebound, although they expect trading to be influenced by inflation data out on Monday as well as on whether the new government announces a new benchmark 10-year bond at subsequent auctions.
“The situation looks a little hazy currently with regard to all the numbers in the budget," said Pradeep Madhav, managing director at STCI Primary Dealer Ltd in Mumbai.
The benchmark 10-year bond yield rose to 8.84% intra-day, it highest level since 21 May, before ending the day at 8.77%, steady from Thursday’s close.
The paper rose 11 basis points (one basis point is 0.01 percentage point) over the last week’s close.
The central bank sold ₹ 150 billion of debt at yields in line with a Reuters poll. It will sell an equivalent amount of long dated bonds and treasury bills next week.
In the overnight indexed swap market, the benchmark 5-year swap rate closed 3 basis points higher at 7.88% while the 1-year rate ended 4 basis points higher at 8.40%. Reuters
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