Indian federal bond yields inched up on Friday, tracking the rise in their US counterparts, with the market divided over the Reserve Bank of India's possible rate action next week. US Treasuries slipped in Europe as markets readied for new issuance next week, giving back some of Thursday's rally seen after Federal Reserve Chairman Ben Bernanke said the central bank would do all it could to restore US growth.
The 10-year Indian benchmark bond yield closed at 8.31 percent, 1 basis point (bp) above its close on Thursday, after moving in a narrow 8.29 percent to 8.31 percent band during the day. Total volume on the central bank's electronic trading platform was a moderate 86.40 billion rupees ($1.9 billion).
"Most people expect a rate hike by the Reserve Bank next week considering that crude oil prices have started rising and will be closing higher for a 3rd consecutive week at around $115 a barrel," said Kushal Maheshwari, senior manager, corporate treasury at Bajaj Corp Ltd. The benchmark five-year overnight indexed swap rate closed at 6.77 percent, up 5 bps on the day, while the one-year rate ended 4 bps higher at 7.63 percent.
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