Indian bond yields inch down but fresh supply eyed

Indian bond yields inch down but fresh supply eyed


Mumbai: Indian federal bond yields eased on Monday, 5 November, on the back of softer US treasuries but fresh supplies and an increase in banks’ cash reserve requirements later this week is seen checking sharp falls.

At 10:00am (0430 GMT), the 10-year federal bond yield was at 7.85%, a notch lower than 7.86% on Friday. Total traded volume was a thin Rs1.20 billion ($30 million) in the first hour of trade.

“There is not much activity in a holiday-shortened week and some traders are bargain buying," said a local trader at a bank.

Trading activity was likely to remain thin ahead of a bond market holiday on Friday, analysts said, and bond prices may not climb much ahead of a slew of auctions this week and uncertainty about a possible increase in state-controlled fuel prices.

The government will sell Rs80 billion of bonds on 8 November. The Reserve Bank of India (RBI) will auction Rs65 billion of treasury bills on Wednesday.

In a policy review last week, the central bank said it would raise banks’ cash reserve ratio by 50 basis points to 7.5%. The move, which takes effect on 10 November, will drain Rs160 billion from the banking system.

The government may raise local fuel prices or cut duties in a bid to ease the pain of state oil firms hit by rising global crude prices, the oil minister said last week.