MUMBAI: Indian federal bond yields treaded water on Friday as firmer global oil prices, overnight rise in US yields and a $2.7 billion debt sale weighed.
Demand for bonds from state-run banks to meet mandatory investment rules held the market together, traders said.
By 10:30 a.m. (0500 GMT), the 10-year benchmark bond yield was at 8.36 percent, steady from Thursday's close after having moved in a 8.35-8.37 percent band.
Total volumes on the central bank's electronic trading platform were a moderate 27 billion rupees ($608 million), compared with the normal 25-35 billion dealt in the first 75 minutes of trade.
"Overnight gains in crude and US yields are keeping the upward pressure on rates, but there is good demand from some state-run banks limiting the rise. Liquidity is also easy, so that is also helping," a senior trader with a foreign bank said.
Banks are required to keep 24 percent of their deposits in government debt and other approved securities under a statutory liquidity ratio norm.
Last Saturday, redemption of 9.39 percent, 2011 bond had boosted inflows into the banking system by 387.372 billion rupees.
Banks borrowed a net 75.60 billion rupees from the central bank's liquidity adjustment facility on Thursday, compared with 137.95 billion rupees in the previous session, and much below 1.05 trillion rupees borrowed late last week, reflecting the easing in cash conditions.
Traders said there was also some government spending seen.
Brent crude dipped below $118 on Friday, after sharp gains a day earlier, as the market awaited US non-farm payrolls report for insight into the pace of economic recovery of the world's biggest oil consumer.
US Treasuries prices fell on Thursday as the encouraging private-sector jobs data and European Central Bank support for Portuguese debt reduced worries about the economy and sovereign fiscal problems in Europe.
The benchmark 10-year US note was trading at 3.15 percent in Asian trade, down 1 basis point from late New York trade on Thursday when it had risen 5 bps.
"I am looking for 8.35-8.40 percent range on the 10-year bond today. Demand would be there at the auction but there is unlikely to be aggressive bidding as such due to the large weekly supplies," said Chetan Shenoy, an associate vice president with IndusInd Bank.
India is selling on Friday 30 billion rupees each of 8.07 percent, 2017, bonds and 8.28 percent, 2027. It will also sell 60 billion rupees of 8.13 percent, 2022, bonds. The results are due after 0900 GMT.
"The 11-year paper may see good interest around 8.50 percent levels, no major demand likely but auction will sail through without any devolvement," the trader at the foreign bank said.
The benchmark five-year swap rate was up 2 bps at 7.75 percent, while the one-year rate was 1 bp higher at 8.08 percent.
The US June non-farm payrolls data due at 1230 GMT, ahead of India's industrial output data on Tuesday and inflation data on Thursday will also be watched for cues.
Traders expect the Reserve Bank of India to raise key rates by a quarter percentage point at a scheduled review on July 26 and the data will cement that view.
Copyright Reuters, 2011
Comments
Comments are closed.