MUMBAI: Indian federal bond yields in narrow band on Tuesday as hopes of a rate pause persisted given global growth concerns, but domestic supplies kept sentiment cautious.
10-year Indian benchmark bond yield was at 8.27 percent, 1 basis point higher than its close on Monday. It traded in the range of 8.24-8.28 percent so far in the day.
Volumes were a heavy 65 billion rupees ($1.4 billion) on the central bank's trading platform compared with about 40 billion rupees usually traded in about the first 2 hours of trade.
"The tone for the economy is bearish and yields will move lower but inflation data and cues on QE3 (Quantitative Easing 3) will be watched," said a senior trader at a state-run bank.
With the global economy sputtering and volatility in financial markets, a speech by Federal Reserve Chairman Ben Bernanke on Friday in Jackson Hole, Wyoming, at an annual gathering of policymakers and academics is being watched closely.
Recent market turmoil on lingering worries over euro zone sovereign debt and signs of weaker US growth have boosted expectations Bernanke may hint at more emergency stimulus for the economy.
Domestic markets are, however, pricing in a rate pause on Sept. 16, at the central bank policy review, given the bleak outlook for global growth.
Bond yields were still holding up due to heavy debt supplies, dealers said.
Seven Indian states will sell 53.5 billion rupees of state loans later on Tuesday. The federal government will sell 100 billion rupees of treasury bills on Wednesday, ahead of a 110-billion-rupee bond auction on Friday.
The one-year rate was up 3 basis points on the day at 7.69 percent.
The benchmark five-year overnight indexed swap rate was up 4 basis points on the day at 6.81 percent.
Copyright Reuters, 2011
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