Indian bond yields at 2-week low on credit worries

Indian bond yields at 2-week low on credit worries


Mumbai: Indian federal bond yields fell to their lowest in two weeks on Friday, 16 November, in tandem with US Treasury yields, which hit two-year lows, but expectations that more supplies could be announced may check a further drop.

US Treasury yields fell as investors turned to the safe-haven bonds following turmoil in credit markets.

At 9:35am (0405 GMT), the 10-year federal bond yield was at 7.87% — its lowest since 5 November and down from Thursday’s close of 7.89%.

“This is mainly due to a sharp rally in US Treasuries but I expect trading to be in a tight range as more bond sales are expected to be announced today," a dealer with a foreign bank said.

The government is scheduled to auction bonds worth Rs70 billion (Rs7,000 crore, $1.8 billion) between 16-23 November and traders said this could absorb part of the surplus cash generated by the central bank’s intervention in the currency market.

The rupee has gained more than 12% in 2007 and the central bank has been buying dollars and releasing rupees in the banking system to cap the local currency’s gains.

Traders said they would be watching inflation data due around noon (0630 GMT) for cues.

The wholesale price inflation is expected to remain steady at 2.97% in early November — its lowest in more than five years, a Reuters poll showed on Thursday.