Indian bond yields rise ahead of outflows

Indian bond yields rise ahead of outflows


Mumbai: Indian federal bond yields rose on Thursday, 13 September. as traders braced for cash outflows toward the previous day’s treasury bill auction and tax payments by companies in the coming days.

At 9:50am (0420 GMT), the 10-year bond traded at 7.88%, up from the previous close of 7.86%. Volume was low at Rs1.6 billion (Rs160 crore, $39.5 million).

“There are concerns about a shortage in liquidity from the beginning of next week," a foreign bank trader said.

The central bank sold T-bills worth Rs65 billion on Wednesday, payments for which are due on Friday. Outflows of around Rs350 billion are expected to take place from the end of this week for corporate taxes.

Traders said an expected cut in the US federal funds rate by the Federal Reserve next week would help sentiment.

The Fed meets on 18 September and a cut in the US rate could put pressure on the RBI to ease policy in coming months, traders said.

Bond yields fell on Wednesday after a sharp slowdown in industrial output growth reinforced expectations the central bank will not raise interest rates.

Output in July rose 7.1% from a year earlier, weighed down by softer manufacturing and consumer demand, well below a forecast of 9.6% and June’s downwardly revised growth of 9%.