MUMBAI: Indian government bonds fell on Wednesday, snapping a two-day winning streak as investors booked profits even as sentiment remained broadly positive due to a continued fall in crude prices.
Traders said bonds would continue to be supported by hopes the Reserve Bank of India will cut interest rates by as early as February. The central bank's next policy review is on Dec. 2 when it is expected to adopt a more dovish tone.
Foreign investors have been especially strong buyers of debt, pushing the benchmark 10-year bond yield to a 15-month low on Tuesday.
"The renewed buying seen in 10-year in the past two days has been from foreign banks on the expectation of rate cuts next year," said Paresh Nayar, head of fixed income and currencies at First Rand Bank.
"The target on the 10-year paper is 8 percent but I don't expect that before the policy. We will see rangebound trading continue until Dec. 2."
The benchmark 10-year bond yield closed 1 basis point higher at 8.16 percent. On Tuesday, the yield had touched 8.14 percent intraday, its lowest since Aug. 8, 2013.
Despite the profit-taking, sentiment was supported by hopes lower oil prices would ease inflation. Brent crude oil slipped towards $78 a barrel on Wednesday as data showed Saudi Arabia increased crude exports in September.
In the overnight indexed swaps, the benchmark five-year swap rate closed 2 bps higher at 7.40 percent and the one-year rate ended up 2 bps at 8.01 percent.
Comments
Comments are closed.