Indian bond yields dip as inflation seen easing

Indian bond yields dip as inflation seen easing


Mumbai: Indian federal bond yields eased on Friday, 7 September, in anticipation of lower inflation, while cash was seen adequate to meet an auction during the day and tax payments later this month.

By 9:50am (0420 GMT), the 10-year bond yield was at 7.89%, down from 7.90% at the previous close.

“Bond yields are down as there is no selling because the general outlook is bullish," a senior dealer with a private sector bank said.

He said inflation was likely to be below 4% the next few weeks even though oil prices were rising.

India’s wholesale price inflation rate is forecast at 3.89% in the 12 months to 25 August, its lowest in 16 months, a Reuters poll showed. The data is due by noon.

Traders expect the auction of Rs70 billion ( Rs7,000 crore, $1.7 billion) of bonds on Friday to sail through as cash in the banking system was ample.

Bids totalling Rs392 billion were accepted at Thursday’s reverse repo auction, which is seen as a barometer of liquidity conditions.

Tax outflows of about Rs350 billion are expected from the middle of the month but traders expect that to be offset by large redemption of treasury bills.