Home >market >stock-market-news >10-year bond yield hits fresh 16-month high, rupee strengthens against US dollar

Mumbai: The 10-year bond yield on Monday gained for the third session to end trading at a 16-month high ahead of key inflation data this week.

The 10-year bond yield closed at 7.175%, a level last seen on 3 August 2016, compared to its previous close of 7.09%. Bond yields and prices move in opposite directions.

Bond yields are already under pressure on the expectation of higher inflation, concern over high bond supply and potentially wider fiscal deficit.

According to a Bloomberg poll, inflation is likely to accelerate in November. The government will issue consumer price index (CPI) and index of industrial production (IIP) data on Tuesday. According to the Bloomberg survey, CPI will be at 4.26% in November against 3.58% in October. IIP probably rose 2.8% year-on-year in October versus 3.8% gain in September, the survey said.

The government will also issue wholesale price index (WPI) data on Thursday. The Bloomberg survey shows that WPI will be at 3.80% in November compared to 3.59% in October.

Traders will also be cautious ahead of the US Federal Reserve outcome on 14 December. Analysts expect the US Fed to raise interest rates for the third time in 2017, which will mark the fifth rate hike since the financial crisis. This will be the final rate hike of outgoing Fed chair Janet Yellen’s tenure.

The Indian rupee strengthened against the dollar, tracking gains in the local equity and Asian currencies markets.

The rupee closed at 64.37 a dollar, up 0.13% from its Friday’s close of 64.46. The rupee opened at 64.46 a dollar and touched a high and a low of 64.31 and 64.46, respectively.

Local equity markets gained over 2.6% or 850 points in the last three trading sessions ahead of the voting outcome of Gujarat election which will on 18 December. The benchmark Sensex rose 0.62%, or 205.49 points, to 33,455.79. So far this year, it has gained 26%.

So far this year, the rupee has gained 5.38%, while foreign institutional investors have bought $8.21 billion and $22.97 billion in equity and debt, respectively.

Asian currencies were trading higher after better-than-expected US jobs data bolstered investor optimism for economic growth. Philippine peso was up 0.41%, Malaysian ringgit 0.27%, Singapore dollar 0.13%, Japanese yen 0.06%, China renminbi 0.04%, China Offshore 0.04% and South Korean won 0.04%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 93.858, down 0.05%, from its previous close of 93.901.

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