Indian federal bond yields and swap rates eased on Friday after April industrial output clocked slower-than-expected growth, leading to some anticipation in the market that the central bank may not continue with its aggressive monetary policy tightening.
India's industrial output growth dipped in April, the latest sign that the rising cost of credit and inflation are slowing the economy. Some traders have been lately speculating the central bank may keep rates on hold at its policy review on June 16, but most analysts said high inflation would prompt the Reserve Bank of India to raise rates but return to its calibrated stance.
The May inflation data due to be released on Tuesday at 0630 GMT will be a crucial indicator of the central bank's actions on Thursday. India's wholesale price index is expected to rise by 8.70 percent in May, up slightly from the previous month, thanks to rising food and fuel prices, a Reuters poll showed on Friday.
The benchmark 10-year bond yield closed down 4 basis points (bps) at 8.23 percent, after moving in a band of 8.23 percent to 8.30 percent during the session. The 10-year bond yield dropped 4 basis points on the week. Total volumes on the central bank's electronic trading platform were high at 139.05 billion rupees ($3.11 billion) compared to the usual 90-100 billion rupees traded on a normal day. The benchmark five-year swap rate closed down 11 bps at 7.64 percent, while the one-year rate ended down 7 bps at 7.83 percent.
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