MUMBAI: Indian federal bond yields rose for a sixth consecutive session on Monday, ahead of heavy debt supplies this week, higher global oil prices and a rise in US yields on Friday.
At 11:05 a.m. (0535 GMT), the 10-year benchmark bond yield was up 1 basis point at 8.36 percent, after trading in a narrow range of 8.36 to 8.38 percent.
Total volumes on the central bank's electronic trading platform were low at 19.85 billion rupees ($446 million), compared with the normal 35-45 billion dealt in the first two hours and half of trade.
"Crude is higher, we have cash management bills, state loans sale, then t-bills and bond sale, there is no reprieve for the market, so yields are bound to rise," said Anoop Verma, an associate vice president with Development Credit Bank.
India is selling 80 billion rupees of cash management bills on Monday, 100 billion rupees of treasury bills on Wednesday and 120 billion rupees of bonds on Friday. State governments will also sell 52.5 billion rupees of bonds on Wednesday, taking total sales this week to 352.5 billion rupees ($7.9 billion).
"Lots of supply this week, so yields can go up by another five to eight basis points," a senior fixed income trader at a private bank said.
US Treasury debt prices slipped on Friday after manufacturing growth topped forecasts, offering some evidence that the economy might not be destined for an extended slowdown.
Brent crude rose above $112 a barrel on Monday, after Eurozone policymakers approved an emergency bailout for Greece and strong US economic data calmed fears of weakening demand in the world's largest oil consumer.
Details of the bonds to be sold on Friday will be announced after market hours on Monday, and could influence direction.
"General risk appetite is back again. Moderately positive data out of the US last week, higher stocks across Europe and US and now Asia. Yields are higher across the region," a senior rates trader with a primary dealership said.
"I think 8.05-8.15 percent should hold on the 1-year swaps, 7.80 to 7.90 on the 5-year swaps while the 10-year bond may hold in 8.35-45 range this week," he added.
The benchmark five-year swap rate was up 4 bps at 7.85 percent, while the one-year rate rose 2 bps to 8.08 percent.
While finance ministry officials have made repeated statements that New Delhi intends to stick to its fiscal deficit aim of 4.6 percent of GDP in the year that started in April, most private economists expect it to overshoot, which may force it to borrow more to fund the shortfall.
Copyright Reuters, 2011
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