Bonds tad up on tight cash, US treasuries

Bonds tad up on tight cash, US treasuries

Mumbai, 21 September Indian federal bond yields edged today, tracking US Treasuries and tighter cash conditions caused by tax outflows. Dealers said expectations that inflation could soften to its lowest since December 2002 in early September could keep the yields from rising further. The data is due around noon.

By 9:45 a.m., the 10-year bond yield was at 7.83%, a notch higher from Thursday’s close of 7.82%.

“Call rates are still firm reflecting the demand for cash. U.S. Treasuries have also fallen significantly," a senior dealer with a private sector bank said.

Overnight call rates were at 7.0-7.25%, as surplus cash with banks has fallen this week due to outflows of about Rs350 billion ($8.8 billion) for tax payments by corporates.

US benchmark 10-year yields rose an impressive 17 basis points on Thursday.

Dealers said liquidity conditions would ease by the end of this month as government spending was expected to pick up.

The central bank’s suspected intervention in the currency market to cap the rupee’s gains could also inject more cash into the banking system.

The rupee was hovering near a nine-year high of 39.85 per dollar.

Traders said high oil prices at just below $82 a barrel could prompt the government to raise domestic fuel prices, which could add to inflationary pressures in the next two months. --------------------------------------------------------------