Bonds have sold off in recent days amid doubts about local rate cuts and the central bank’s stance on the banking system’s liquidity.
“The bond movement looks like a repeat of July-August followed by a rally in September. This time, December would be a month when equity market yields fall,” said Pawan Somani, founder of Infinask Advisors.
New Delhi raised 210 billion rupees ($2.39 billion) through an auction against the target of 320 billion rupees as the Reserve Bank of India did not accept any bid for the 6.28% 2032 bond.
The yield on the 10-year benchmark ended at 6.5317%, down from 6.5730% on Thursday. Earlier in the day, the index reached 6.5964%, the highest level since October 1.
A day earlier, the 10-year yield broke the crucial level of 6.55% after Jerome Powell, chairman of the US Federal Reserve, indicated that a rate cut in December was not yet a done deal. “This move was surprising but much needed as benchmark bond yields would have tested 6.60% and even higher in the next few sessions,” said a senior finance ministry official, who declined to be named as he is not authorized to speak to the media. bps after an increase in the bps in September. Bond yields rise when prices fall.
The declining market liquidity of the banking system has kept bond trading volumes limited.
PRICES
Interest rates on overnight index swaps in India ended marginally lower, in line with bond yields.
The one-year OIS rate ended at 5.4750% and the two-year rate closed at 5.4250%.
The five-year swap rate was 5.67%. ($1 = 88.6950 Indian Rupees)
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