Bond yields steady; US Fed decision awaited

Bond yields steady; US Fed decision awaited

Mumbai: The bond yields ended steady on Wednesday as traders awaited the US Federal Reserve’s policy statement for cues but the underlying sentiment was cautious ahead of supplies later this week.

The yield on the benchmark 10-year bond ended up at 8.09%, unchanged from its previous close. The most traded 7.02%, 2016 bond also ended steady at 7.57%.

Volumes were a heavy Rs117.40 billion ($2.6 billion) on the central bank’s trading platform.

“The market was mainly moving on technical factors," said Vineet Malik, head of interest rates at HSBC India.

The government will sell Rs50 billion each of 7.38% bonds maturing in 2015 and a new 10-year bond on Friday, along with Rs20 billion of 8.28% bonds maturing in 2032.

Dealers said the market was aligning itself to the possibility of the new 10-year bond being sold at around 7.90% levels.

“On the day of the policy there were expectations that there could be another mid-cycle rate hike around June but now looking at the global scenario, that expectation is fading," Malik added.

Greece’s exploding debt crisis eclipsed all else on financial markets on Wednesday, knocking global stocks hard and pushing the euro for a time to a one-year low against the dollar.

The Reserve Bank of India (RBI) hiked its key policy rates and banks reserve ratio by 25 basis points each last week and some analysts had said it might make another tightening move sometime in June.

India’s headline inflation could be below 9% in April and would start easing further in coming months, a senior government adviser said on Wednesday, as food prices are seen easing on prospects of a normal monsoon.

All eyes are now on the Federal Reserve’s rate decision and the accompanying statement for cues on the central bank’s outlook on growth and inflation.

The two-day meeting of the Fed’s rate setting committee will end on Wednesday and the decision is expected at 1815 GMT.

The benchmark five-year interest rate swap ended at 6.84/86%, from Tuesday’s close of 6.86/89%.

In interest-rate futures on the National Stock Exchange, the June contract implied a yield of 8.2735%.