Mumbai: Indian federal bond yields fell for a second session to two-week lows on Friday as sliding oil prices calmed inflationary worries while investors bought bonds to meet their reserve requirements.
The benchmark 10 year bond yield was at 8.34%, a level it last tested on 18 September, data and 12 basis points below the previous close of 8.46%.
Volume was Rs17.65 billion on the central bank’s electronic trading platform with the 10 year bond being the most actively traded.
“Yields were down mainly due to easing inflation concerns and as temporary demand-supply mismatch in bonds are forcing banks to buy more debt,” said Sachchidanand Shukla, an economist at Enam Securities.
Indian banks are required to invest 25% of their deposits in government securities.
Oil fell for a third consecutive day to around $93 a barrel. India imports a majority of its oil needs.
Tight cash conditions in the money market and weekly inflation data due later in the day may deter investors from adding aggressive positions.
Overnight cash rates were around 14%, much above the central bank’s main lending rate of 9%. The central bank injected a record Rs917.2 billion at 9% at its two repo auctions on Wednesday.
The market was closed on Thursday for a holiday.
India’s annual inflation rate is expected to hold steady above 12% in the third week of September, with prices of manufactured products seen higher, a poll showed.