Home >Market >Stock-market-news >Bonds fall after ‘puzzling’ retail inflation data

Mumbai: The yield on 10-year government bond jumped 4 basis points as traders remained cautious after ‘puzzling’ retail inflation data. The yield on 10-year government bond was at 7.26%, higher than its Monday’s close of 7.224%. Bond yields and prices move in opposite directions.

Data released by the Central Statistics Office (CSO) on Monday showed consumer price index (CPI) based inflation falling to an 18-month low of 2.19% in December, against 2.33% a month ago, as food prices continued to slide. But core CPI inflation increased to 5.73% in December due to huge jump in health and education inflation.

Most sub-categories of core inflation recorded an increase. Medical services inflation soared to 9% in December from 7.2% in November; education services jumped to 8.4% from 6.6%; personal care items rose to 4.6% from 4.1%; household goods and services climbed to 6.4% from 5.8% and recreation services increased to 6% from 5.9%. Clothing inflation remained flat at 3.5%.

“The sharp increase in rural health costs amid a fall in headline CPI as well as weak rural demand is puzzling. I wonder what the explanation is," said Niranjan Rajadhyaksha, research director and senior fellow at IDFC Institute, in a tweet.

At 9.15 am, the rupee was trading at 70.90 a dollar, up 0.03% from previous close of 70.93. The home currency opened at 70.75 a dollar.

The benchmark Sensex index rose 0.21% to 36,085.52 points. Year to date, it is rose 0.6%.

So far this year, the rupee has declined 1.4%, while foreign investors have sold $326.90 million and $48.10 million in the equity and debt markets respectively.

Asian currencies gained after China took more steps, including further tax cuts, to revive its slowing economy. South Korean won was up 0.33%, Indonesian rupiah 0.29%, China renminbi 0.26%, Thai Baht 0.2%, Taiwan dollar 0.15%, China Offshore 0.13%, Malaysian ringgit 0.11%, Singapore dollar 0.1%. However, Japanese yen was down 0.33%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 95.515, down 0.10% from its previous close of 95.61.

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