Bond yields up ahead of June inflation data

Bond yields up ahead of June inflation data

Mumbai: The bond yields rose on Tuesday, after moving in a tight range, as traders braced for double-digit inflation in June and debt supply of $2.8 billion later this week.

The yield on the benchmark 10-year bond ended a basis point higher at 7.62%. It traded in a narrow band of 7.61% to 7.63%. Volume was a moderate Rs5,840 crore ($1.2 billion) on the Reserve Bank of India’s trading platform.

“The main concern is tomorrow’s inflation number and people are not adding any positions," said Debendra Dash, a trader at Development Credit Bank in Mumbai.

The wholesale price index (WPI) in June probably rose 10.8% from a year earlier, faster than a 10.16% rise in May, a Reuters survey of economists showed.

Traders were also cautious because they expect the central bank to tighten policy again at its quarterly review on 27 July after increasing key rates by 25 basis points earlier this month.

Investors remained on the sidelines ahead of a government bond sale on Friday. India will sell Rs13,000 crore of bonds in the auction.

“The cut-off yields at the auction will provide cues for medium and long tenor bonds," said a bond dealer with a foreign bank.

The one-year swap rate ended at 5.64%, lower than Monday’s closing of 5.69%. The benchmark five-year swap rate ended at 6.77%, compared with Monday’s closing of 6.76%.

In the interest rate futures on the National Stock Exchange, the September contract implied a yield of 8.0007%, while the December contract was not traded.