Mumbai: Bond yields rose on Tuesday as traders sold debt ahead of auctions and election results, and looked past dismal factory output data on a view that economic conditions will improve in coming months.
The benchmark 10-year bond yield ended at 6.41%, seven basis points above its previous close of 6.34% but contained within a rough 6.15-6.45% range traded over the past three weeks.
It rose as high as 6.42% in the day.
Volumes were a normal Rs72.05 billion ($1.5 billion) on the Reserve Bank of India’s trading platform, with the 2019 bond being the most actively traded.
Industrial output fell 2.3% in March from a year earlier, its steepest decline in at least 14 years in March, but analysts said the economy was still set for recovery from late 2009.
“The upward revision of February (output) numbers has led to profit booking, but it looks like yields will hold at current levels,” said Satish Jeurkar, head of fixed income at Saraswat Co-operative Bank.
“However, the market will remain rangebound ahead of the auction outcome and election results,” he said.
The outcome of a five-phase national elections is due on 16 May. A coalition government is the expected outcome, with the market hoping one of the two major national parties wins enough votes to control policy making.
“The market wants any stable government but there are fears that if the new government comes up with a populist budget, it may affect the market borrowing programme.”
Gross borrowing for the 2009/10 fiscal year that begain in April is already projected at a record Rs3.6 trillion, with two-thirds of that to be completed by the end of September.
The central bank will auction Rs70 billion of treasury bills on Wednesday and Rs120 billion of bonds on Thursday.