MUMBAI: Indian government bonds rose on Friday, buoyed by the central bank's liquidity support and the country's sale of 150 billion rupees ($2.42 billion) worth of debt at better-than-expected cutoffs at a weekly auction, signalling strong demand.
The cutoffs for the benchmark 10-year bond came in at 8.7719 percent, below the 8.7811 percent estimated in a Reuters poll. The bid-to-cover ratio, a gauge of demand, for the 2023 bond stood at 2.6, showing high demand.
The Reserve Bank of India sold an additional 100 billion rupees via 7-day term repo, providing more liquidity to markets. This was in addition to 390 billion rupees of 14-day term repo on Friday.
Impact from data released Friday showing India's trade deficit widening in December had muted impact, given it was seen remaining manageable at $10.14 billion.
"I think the spikes in inflation we saw may be cooling off, though there may not be an overall trending down of inflation. However, I expect the RBI to hold rates during this review," said Harish Agarwal, a dealer at First Rand Bank in Mumbai, referring to the central bank's review on Jan. 28.
Data released later in the day showed that November industrial output fell 2.1 percent compared with a forecast of 1 percent rise.
The benchmark 10-year bond yield ended 3 bps lower at 8.76 percent. For the week, it ended 7 bps lower.
India is due to post wholesale and consumer prices data next week amid expectations inflation may have eased on the back of easing vegetable prices.
Easing inflation would raise expectations the central bank will leave interest rates on hold at its policy review on Jan. 28.
The benchmark 5-year swap rate ended 1 bp lower at 8.31 percent. The 1-year rate was down 4 bps at 8.37 percent.
Comments
Comments are closed for this article.