Mumbai: Indian federal bond yields extended their rise from seven-week lows as tighter cash conditions pushed up overnight rates, prompting investors to cut positions as they looked ahead to weekly inflation data.
At 10:10 a.m. the 10-year bond yield was at 7.84%, a notch higher than the previous close. Volume was a low Rs10.70 billion.
The yield touched 7.77% on 13May, its lowest since 25March, after weak industrial output data had raised worries of an economic slowdown that might keep the central bank from raising interest rates.
Overnight call money rates traded at 6.90/7.0%, off a high of 7.25% but still above 14May’s close of 6.50/6.60%, as cash supplies tightened.
“Liquidity is a bit tighter now and a perk up in the inflation number will push up yields further,” a trader with a foreign bank said.
Cash conditions have been squeezed this week by settlements of bond auctions worth $100, excise payments by firms of about Rs80 billion and an increase in banks’ reserve requirement that drained about Rs90 billion from the system.
Annual wholesale price inflation hit a 3- year peak of 7.6% in late April, and data for early May will be released on 16May.