Indian bonds end slightly lower; inflation data eyed

MUMBAI: Indian government bonds ended marginally lower on Thursday as investors trimmed bond holdings ahead of the key consumer price inflation data.

The data is scheduled for release around 1200 GMT.

A Reuters survey of 37 economists showed consumer price inflation probably eased to 8.4 percent in May, from April's three-month high of 8.59 percent as food prices fell slightly.

Also on watch is April's industrial production data, which according to a Reuters poll, probably rose for the first time in April since January, to reflect healthy growth in core industries.

Intraday, bonds had pared some gains after a central bank deputy governor said there was no discussion for raising foreign investor limit in government debt at this point.

"Right now there is no such discussion," Reserve Bank of India Deputy Governor H.R. Khan said, in response to a question on raising the foreign institutional investment (FII) limit in government debt, on the sidelines of a banking seminar.

Further ahead, investors are closely watching out for developments on the budget, which is likely in early or mid-July, to get clarity on the government's plans to rein in the fiscal deficit.

"The market is largely expecting inflation to be lower but bonds should remain in a range until we get a handle on how the budget is going to be," said N.S. Venkatesh, treasurer, IDBI Bank.

The benchmark 10-year bond yield ended up 1 basis point at 8.55 percent.

The benchmark five-year swap rate ended down 2 bps at 7.80 percent and the one-year rate fell 1 bp to 8.23 percent.