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Business News/ Market / Stock-market-news/  Indian bond yield hits six-week high; OIS rates at one-year peak
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Indian bond yield hits six-week high; OIS rates at one-year peak

The benchmark 10-year bond yield closes 9 basis points higher at 7.52%, its highest since 14 May

The 10-year yield has risen 26 basis points in the last three trading sessions. Photo: Ramesh Pathania/Mint (Ramesh Pathania/Mint)Premium
The 10-year yield has risen 26 basis points in the last three trading sessions. Photo: Ramesh Pathania/Mint
(Ramesh Pathania/Mint)

Mumbai: Indian government bonds slumped for a third consecutive session on Monday, sending the benchmark yield to a six-week high, as foreign funds continued to sell domestic debt as the rupee hovered near a record low.

The 10-year yield has risen 26 basis points in the last three trading sessions.

The rupee stayed within striking distance of its all-time low of 59.9850 per dollar hit last week, remaining under pressure on worries about a rollback in US monetary stimulus and about China’s financial sector.

Yet the recent steep falls in debt due to selling from foreign institutional investors (FIIs) are starting to lure domestic banks, which could start to provide support in the absence of another major global blow.

Investors are likely to remain cautious ahead of current account deficit data for the January-March quarter. The deficit has been a key source of stress on the rupee and is an economic indicator that is also closely monitored by the central bank.

“FIIs are continuing to sell. We are likely to see 7.55% levels on the new 10-year bond this week," said Harish Agarwal, a fixed income dealer with First Rand Bank.

The benchmark 10-year bond yield closed at the day’s high of 7.52%, its highest since 14 May and up 9 basis points on the day.

Total volumes on the central bank’s trading platform were at a low 19,260 crore compared with the average 60,000 crore in recent weeks.

Foreign investors have sold a net $5.3 billion worth of debt between 22 May and Thursday, a streak that traders say is unprecedented.

The rise in US treasury yields in recent sessions, which has lead to a lowering of the interest rate differential between the two countries, has also been prompting foreign fund withdrawals.

In the overnight indexed swap market, rates continued to soar with the benchmark five-year rate rising to a one-year high.

Swap rates tend to be sensitive to US Treasury yields, which continued to rise in Asia trading.

The benchmark five-year OIS rate ended up 14 bps at 7.39%, its highest since 31 May, 2012. The one-year rate closed 5 bps higher at 7.47%.

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Published: 24 Jun 2013, 05:56 PM IST
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