Mumbai: The federal bond yields edged away from their 2009 high on Tuesday as some investors saw value after a sharp move up in recent days, but supply concerns are expected to prevent any sharp fall in the near term.
The 10-year benchmark bond yield ended at 7.30%, below Monday’s close of 7.34%. It had risen to 7.38% on Monday, its highest since 20 November.
The 10-year yield is still up 12 basis points since Thursday’s close, with most of the move coming on bond auction results on Friday that showed a diminishing appetite for debt.
Volumes were a high Rs51.95 billion ($1.1 billion) on the central bank’s trading platform.
“Value buying is seen but the supply is huge,” said Vineet Malik, head of interest rates at HSBC India.
“The market is waiting to see if the central bank is buying in the secondary market, but there has been no indication so far.”
The central bank sold Rs49 billion of state loans on Tuesday, retaining an additional subscription of 4 billion received at the auction. The cut-off yields were in line with market expectations.
Dealers said the demand at the state loan auction was primarily from pension funds, who like high-yielding securities to put in their hold-to-maturity portfolio where they are free from mark-to-market risks.
The central bank will auction Rs60 billion of treasury bills on Wednesday and Rs120 billion of bonds on Friday.
The benchmark five-year interest rate swap ended at 6.44/48%, from a previous close of 6.46/50%.