Mumbai: The bond yields moved in a narrow range on Thursday supported by the central bank’s decision to hike rates marginally, but sentiment was cautious ahead of the Rs120 billion auction on Friday.
At 12:52 pm, the yield on the 10-year benchmark bond was down 3 basis points (bps) on the day at 7.98%. It rose 2 bps to 7.99% after the food and fuel price data.
Dealers said the 10-year benchmark bond was unlikely to fall below 7.95% levels as the fear of impending supplies was still there.
The most traded 8.20%, 2022 bond was at 8.14%, from its previous closing of 8.17%.
The annual food and fuel inflation quickened in the week to 10 April, putting upside pressure on the headline inflation and central bank to take action before its next policy review in July.
However, traders said the market movement was just a knee-jerk reaction and they were watching the monsoon forecast due Friday to take a view on inflation and economic growth.
The government is set to sell Rs120 billion of bonds on Friday, including Rs60 billion of the 7.02% bonds maturing in 2016 and 30 billion of the 8.26% 2027 bonds and Rs30 billion of 2020 floating rate bonds.
Traders see the auction to be met with good demand after the favourable rate move by the central bank on Tuesday.