Indian bond yields ease on ample cash, oil

Indian bond yields ease on ample cash, oil


Mumbai: Indian federal bond yields eased on Wednesday, 26 september, from three-week highs hit in the previous session, as investors shed their bearishness on adequate cash supplies and continued intervention in the currency market.

Sentiment was also underpinned by oil prices that were below $80 a barrel, dealers said.

At 9:45am (0415 GMT), the 10-year bond yield was at 7.88%, lower than Tuesday’s close of 7.91%.

It hit a two-month low of 7.78% last week, after the US Federal Reserve cut its interest rates.

“We were in a bit of oversold territory yesterday and investors thought these were good levels to resume buying," a dealer with a private sector bank said.

“Liquidity seems to be very comfortable," he said.

The central bank will sell Rs10,000 crore ($2.5 billion) of market stabilization scheme bonds and Rs6,500 crore of treasury bills on Wednesday, and dealers expect the auction to sail through smoothly.

Surplus cash, as reflected by the daily reverse repo auction, totaled Rs26,180 crore on Tuesday, sharply higher from Monday’s Rs4,495 crore.

The rupee hit a fresh nine-year peak of 39.62 a dollar on Wednesday and spurred central bank intervention, which involves buying dollars and releasing rupees into the banking system.

Dealers said a pick up in government spending and redemption of about Rs10,000 crore of treasury bills this week would also increase liquidity.