Mumbai: Indian bond yields edged up on Thursday as investors pared positions in anticipation of further supplies to absorb surplus cash, while concerns over rising inflation and possible central bank action also hurt sentiment.
At 10:30am (0500 GMT), the yield on the 10-year federal bond was at 7.95%, compared with Wednesday’s close of 7.92%.
On Monday, it had risen as high as 8%, its highest since 16 August.
“The market is nervous because the central bank could announce anything on Friday,” a dealer with a state-owned bank said.
Inflation data for the week ended 29 March will be released on Friday and is being awaited by the markets after the widely watched wholesale price rate hit 7% the week before, its highest in more than three years.
The dealer said chances of a rate action by the Reserve Bank of India on Friday appeared slim and it may wait until its policy review on 29 April before taking any tightening steps.
But it could announce the sale of more bonds to absorb inflation-fuelling surplus cash it the banking system.
RBI Deputy Governor Rakesh Mohan said on Wednesday the central bank would give an appropriate response and analysis of macro developments at its month-end review.
The RBI accepted bids worth Rs733.50 billion ($18.3 billion) at its daily money market operations on Wednesday, indicating the system was flush with funds.
It will sell Rs50 billion of market stabilization scheme bonds on Thursday and Rs100 billion of federal bonds on Friday. It sold Rs80 billion of treasury bills on Wednesday, payments for which are due by Friday.