MUMBAI: Indian federal bond yields rose for the fifth straight session on Friday, tracking an overnight rise in US yields and ahead of a $3.3 billion debt sale later in the day, but volumes were low as settlement of trades was closed for quarter-end accounting.
10-year Indian benchmark bond yield was up 2 basis points (bps) at 8.35 percent. The yield had risen 35 bps in the June quarter, its biggest quarterly rise since the December quarter of 2009.
Total volumes on the central bank's electronic trading platform were at a low 15.90 billion rupees ($357 million) compared to the normal 25-35 billion rupees dealt in the first hour and half of trade.
India's benchmark five-year swap rate rose 6 bps to 7.82 percent, while the one-year rate was up 3 bps at 8.08 percent.
"US yields were higher, there is also an auction, so yields have risen. The 10-year bond yield may hold in a 8.33-8.37 percent band today," a senior dealer with a private bank said.
The bonds on sale include: 30 billion rupees each of 7.83 percent, maturing in 2018, 8.26 percent, 2027, and 8.30 percent, 2040, and 60 billion rupees of 7.80 percent, 2021.
US Treasury debt prices extended the week's losses on Thursday, ending the quarter on a weak note at odds with the bond market's overall move up over the last three months.
The 10-year benchmark US notes were at 3.15 percent in Asian trade, compared with 3.17 percent in late New York trade on Thursday when it had risen sharply from Wednesday's 3.11 percent.
"There is no settlement today, so volumes are lower, unless there are some comments or any significant news somewhere, trading will be lacklustre. Only auction results will be the key," a senior dealer with a foreign bank said.
Traders said the drop in global crude on Friday would limit a sharp rise in bond yields.
Brent and US oil fell on Friday after manufacturing in China hit a 28-month low, raising concerns that fuel demand at the world's second largest oil importer may slow with the market also watching the progress of reserve oil stocks sales by IEA member nations.
Copyright Reuters, 2011
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