Mumbai: The federal bond yields came off day’s low on Monday as traders pared positions following a drop in yields on lower-than-expected inflation in October, but eyed forthcoming auctions and global cues for further direction.
The yield on the 10-year benchmark bond ended at 7.31%, 1 basis point below its previous closing of 7.32%.
Volumes were a heavy Rs67.15 billion ($1.5 billion) on the Reserve Bank of India’s trading platform.
“Market will be watching for global events in the next few days... return of risk appetite, crude prices,” said Piyush Wadhwa, senior vice-president at ICICI Securities Primary Dealership in Mumbai.
“According to the calendar, there won’t be an auction next week so this week’s auction should be well-bid and yields could probably come off a bit provided global events are favourable.
“Yields could remain in the range of 7.25-7.35% in the near term,” Wadhwa said.
Annual wholesale price index based inflation accelerated in October from a month earlier on costlier minerals and fuels, and analysts expect monetary tightening from next year as the economy picks up.
The central bank will auction Rs70 billion of treasury bills on Wednesday, ahead of a Rs100 billion bonds sale on Friday.
Long-dated Treasuries edged higher in Europe on Monday, with markets anticipating US Federal Reserve chairman Ben Bernanke to reiterate interest rates would stay low for some time. Bernanke is scheduled to address the Economic Club of New York at 1715 GMT.
In interest rate futures on the National Stock Exchange (NSE), the December contract was implying an yield of 7.9823%, above its previous close of 7.9244%.
The yield implied in the March contract was at 8.2716%, down from its previous close of 8.3333%.
The benchmark five-year interest rate swap closed at 6.69/73%, from Friday’s close of 6.67/70.