Indian bond yield

Indian federal bond yields and swap rates ended higher on Friday as sentiment remained bearish on further rate increase fears and on concerns over stubborn inflation and high oil prices. "The selling in bonds was due to a surge in oil prices and on bearishness about interest rates," said Ravindra Kini, treasury in-charge at IDBI Gilts, adding, that there was a view that rate increases may be advanced.
Oil is India's largest import and any deregulation in diesel prices could stoke inflation. Oil rose more than $2 a barrel on Friday after the United Nations approved military action to contain Libyan leader Muammar Gaddafi, heightening geopolitical tensions in the oil-rich Middle East.
The Reserve Bank of India (RBI) raised interest rates by 25 basis points (bps) on Thursday, for the eighth time since last March, and warned both of inflationary pressures and emerging risks to growth. It also raised concerns of upside risks to inflation on elevated global oil prices. A day later, People's Bank of China raised lenders' required reserves by 50 bps, for the third time this year and the sixth since November, also citing inflation worries.
The yield on the most-traded 8.08 percent 2022 bond ended at 8.10 percent, up 2 bps from Thursday's close, while the second most-traded 8.13 percent 2022 bond ended at 8.09 percent, up 1 bp from Wednesday. The bond was shut for trading on Thursday due to coupon payment. The benchmark 10-year bond yield settled steady at 8.00 percent after rising as much as 8.02 percent intraday. The overnight indexed swaps too were hit by talks of imminent hardening of interest rates, dealers said.
The benchmark five-year swap rate ended 7 bps up at 7.97 percent, after rising to 8 percent, its highest since March 8. One-year swap rate ended 3 bps up at 7.43 percent after rising to 7.45 percent, its highest since March 3. The swap curve is expected to shift upwards further with swap rates seen rising across tenures on concerns of further rate hikes, inflation and liquidity worries.