Indian federal bond yields were steady to lower on Monday as the central bank's cash infusing steps on Thursday kept the market mood positive but traders were concerned that its hawkish take on inflation meant policy tightening sooner than later.
India's central bank left interest rates on hold on Thursday and unveiled steps to address persistently tight liquidity, but warned inflation was still well above its comfort level, raising the prospect that it will resume monetary tightening in January.
The central bank cut the statutory liquidity ratio -- the minimum level of deposits banks must hold in government approved securities -- to 24 percent from 25 percent, and unveiled 480 billion rupees ($10.5 billion) worth of bond purchases over the next month.
At 10 a.m. (0430 GMT), The yield of the most traded 8.08 percent, 2022 bond was at 8.01 percent, down from 8.02 percent at close on Thursday. It had fallen to 8 percent in early deals.
The yield of the benchmark 10-year 7.80 percent bond was steady at 7.95 percent. The bond market was shut on Friday for a local holiday. Volumes were a moderate 25.95 billion rupees ($570 million) on the central bank's trading platform.
"The market is starting to get worried about inflation. I feel the yield curve will steepen," said Ritesh Jain, head of fixed income, Canara Robeco Mutual Fund .
"Shorter end yields up to 2017 might not fall much or remain there and 2020 upwards will start correcting," he added.
The benchmark 10-year bond yield, which had risen to a 26-month high of 8.22 percent on Dec. 6 because of liquidity concerns fell as much as 30 basis points on Thursday after the central bank announced its cash support steps.
Some dealers said they waited for the details of bonds the central bank plans to buy as part of its bond purchase programme as well as this week's 110 billion rupees bond sale.
Indian bonds also found support in Friday's rally in U.S. Treasuries.
Local dealers said, however, bond players were cautious as clearing house data showed state-run banks were major sellers of bonds on Thursday with net sales of 40.38 billion rupees.
"There is still more room for yields to fall because the central bank will buy bonds for the next one month, but there are concerns that the market will have to go through a wall of selling by state-run banks before that," said a senior trader with a primary dealer.
The benchmark five-year overnight indexed swap was at 7.37 percent, down 2 basis points from Thursday.
The one-year overnight indexed swap was steady at 6.80 percent.
Source: http://economictimes.indiatimes.com/markets/bonds/Bond-yields-soft-inflation-worry-weighs/articleshow/7131646.cms
India's central bank left interest rates on hold on Thursday and unveiled steps to address persistently tight liquidity, but warned inflation was still well above its comfort level, raising the prospect that it will resume monetary tightening in January.
The central bank cut the statutory liquidity ratio -- the minimum level of deposits banks must hold in government approved securities -- to 24 percent from 25 percent, and unveiled 480 billion rupees ($10.5 billion) worth of bond purchases over the next month.
At 10 a.m. (0430 GMT), The yield of the most traded 8.08 percent, 2022 bond was at 8.01 percent, down from 8.02 percent at close on Thursday. It had fallen to 8 percent in early deals.
The yield of the benchmark 10-year 7.80 percent bond was steady at 7.95 percent. The bond market was shut on Friday for a local holiday. Volumes were a moderate 25.95 billion rupees ($570 million) on the central bank's trading platform.
"The market is starting to get worried about inflation. I feel the yield curve will steepen," said Ritesh Jain, head of fixed income, Canara Robeco Mutual Fund .
"Shorter end yields up to 2017 might not fall much or remain there and 2020 upwards will start correcting," he added.
The benchmark 10-year bond yield, which had risen to a 26-month high of 8.22 percent on Dec. 6 because of liquidity concerns fell as much as 30 basis points on Thursday after the central bank announced its cash support steps.
Some dealers said they waited for the details of bonds the central bank plans to buy as part of its bond purchase programme as well as this week's 110 billion rupees bond sale.
Indian bonds also found support in Friday's rally in U.S. Treasuries.
Local dealers said, however, bond players were cautious as clearing house data showed state-run banks were major sellers of bonds on Thursday with net sales of 40.38 billion rupees.
"There is still more room for yields to fall because the central bank will buy bonds for the next one month, but there are concerns that the market will have to go through a wall of selling by state-run banks before that," said a senior trader with a primary dealer.
The benchmark five-year overnight indexed swap was at 7.37 percent, down 2 basis points from Thursday.
The one-year overnight indexed swap was steady at 6.80 percent.
Source: http://economictimes.indiatimes.com/markets/bonds/Bond-yields-soft-inflation-worry-weighs/articleshow/7131646.cms
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