Indian federal bond yields fell to six-week lows on Friday on strong demand at a 100 billion rupee ($2.1 billion) auction and data showing sluggish loan growth, which could see banks park more surplus funds in debt. The yield on the 10-year benchmark bond ended at 7.18 percent, its lowest since October 8. It had ended at 7.25 percent on Thursday.
The yield fell 14 basis points over the week. Volumes were a heavy 221.15 billion rupees on the central bank's trading platform. Cut-off yields at the bond sale were below market expectations and the auction was fully covered. As well, no auction is planned for next week and traders say the market can absorb the 640 billion rupees of government bonds scheduled to be sold over the rest of the fiscal year.
In interest rate futures on the National Stock Exchange (NSE), the December contract implied a yield of 7.9973 percent, above its previous close of 7.9581 percent. The yield implied in the March contract was at 8.2664 percent, below its previous close of 8.2921 percent. The benchmark five-year interest rate swap ended at 6.50/54 percent, down from a previous close of 6.59/63.
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