Indian bond yields, swaps rise

Indian federal bond yields and swap rates rose on Friday despite bullish cut-offs at a debt sale earlier in the day as traders started looking ahead at rising global crude prices, higher US yields and the pipeline of domestic debt supplies. The government raised 120 billion rupees ($2.7 billion) in a sale of bonds on Friday. The central bank set a cut-off yield of 7.80 percent at the auction of the new 10-year paper, well below a median estimate of 7.85 percent in a Reuters poll.
The cut-off yield for the new seven-year paper was 7.83 percent, compared with 7.87 percent in the poll. Yields briefly fell 1 basis point across tenors after the bullish cut-offs, but investors soon started dumping bonds on other emerging concerns like rising oil prices and the uptick in US yields. The yield on the most-actively traded 8.13 percent, 2022 bond and the second-most traded 8.08 percent, 2022 bond both rose 7 basis points to 8.12 percent.
The newly issued 7.80 percent 2021 paper closed at 7.86 percent, 6 basis points above the level it was issued. Total volume on the central bank's electronic trading platform was a heavy 95.60 billion rupees compared with around 60-70 billion rupees traded in recent sessions.
"I think market had bid too aggressively in the auction. There were many negatives which were being ignored including the ECB rate hike, further rise in oil and US treasury yields and the domestic week-on-week inflation rise," said Bekxy Kuriakose, head of fixed income at L&T Investment Management. The European Central Bank raised interest rates on Thursday for the first time since the 2008 financial crisis and signalled it was ready to tighten policy further if needed to check rising prices.