Indian long-dated bond yields ease on rate view

Indian long-dated bond yields ease on rate view


Mumbai: Longer-dated Indian federal bond yields slipped on Wednesday, 19 December, amid hopes local rates may have peaked, while medium and shorter-tenor bonds were steady as investors waited for cash conditions to return to normal.

At 9:41am, the 10-year federal bond yield was at 7.89%, steady from the previous close, and the 29-year bond yield edged down one basis point to 8.21% from Tuesday’s close.

Total volume on the central bank’s electronic trading platform was at Rs2.25 billion ($57 million) in the first 41 minutes of trade.

HSBC said in a recent report that the next move in policy rates may be a cut in 2009 as the uncertainty about local growth outlook has increased and the prospects for the US economy have become more worrisome.

“The supply on the longer-tenor bond side has also thinned quite considerably in recent weeks and that, coupled with strong demand from pension funds and insurance companies, is pushing yields lower," said a dealer at a foreign bank.

The central bank has sold just Rs20 billion of longer-dated bonds so far this month, one-sixth of the amount it sold last month.

Dealers were also waiting on an auction of Rs15 billion of treasury bills later in the day, which follows the sale of Rs30 billion of state loans on Tuesday, for signs of how strong demand was.

Overnight cash rates were quoting around 7.3-7.5%, above the 6% levels when cash is adequate, restricting demand for debt.

India is confident its economy will grow by more than 9% in the fiscal year to end-March despite a jump in the value of the rupee against the dollar and high interest rates, a minister said on Tuesday.