MUMBAI: Indian government bonds gained for a third straight session on Monday as the rupee remained largely stable after having hit a record low last week, but traders were wary of adding huge positions until clarity emerged on the direction of the currency.
Weak economic data is also raising hopes the Reserve Bank of India may shift its focus back to growth after its cash tightening steps in mid-July.
Indian factory activity shrank for the first time in more than four years in August while April-June growth data after the close of markets on Friday showed the economy expanded at its slowest quarterly rate since the global financial crisis.
"Value buying and a stable rupee are helping bonds. The market seems to be in a bullish mode with lower GDP growth giving some hope for a rate cut as well," said Harish Agarwal, a fixed income trader at First Rand Bank.
"The 10-year bond yield may trade in a 8.25 percent to 8.65 percent range," he added.
The benchmark 10-year bond yield closed at 8.46 percent, down 14 basis points on the day. Over the last three sessions, the 10-year is down 50 basis points.
Traders are also hopeful ex-International Monetary Fund economist Raghuram Rajan, who takes over as RBI Governor this week, will adopt a more growth-focussed approach.
Traders will continue to monitor movements in the rupee for near-term direction with an eye on global developments.
Brent crude oil steadied around $114 on Monday, consolidating after a week of gains, as a military strike against Syria looked less imminent.
In the overnight indexed swap market, the benchmark five-year rate closed down 3 bps at 8.50 percent. The one-year rate ended 2 bps lower at 9.51 percent.
Comments
Comments are closed for this article.