MUMBAI: Indian federal bond yields eased on Wednesday following a $2.5 billion debt purchase announcement by the central bank, but concerns about rising oil prices held declines in check.
The 10-year benchmark bond yield ended at 8.20 percent, down from Tuesday's close of 8.21 percent.
The Reserve Bank of India (RBI) said after the close of trading on Tuesday that it would buy 9.15 percent 2024 bonds, 8.35 percent 2022 bonds, 8.28 percent 2027 bonds and 8.28 percent 2032 bonds on Friday.
The market shrugged off news that India's economic growth slowed to 6.1 percent in the three months to December, the weakest annual growth in almost three years.
"Crude is still moving higher and all eyes are on the RBI's March policy now," said Harish Agarwal, a dealer at First Rand Bank in Mumbai. "Not many are expecting rate cuts," he added.
RBI Deputy Governor Subir Gokarn recently highlighted rising oil prices as an emerging risk factor.
The RBI will announce the results of its policy review on March 15, a day before the government hands down its budget.
Brent crude oil gained over $1, snapping two days of sharp falls, on expectations that cheap loans from the European Central Bank will spur buying of riskier assets.
"An oil price shock could easily derail the economic stabilization," Nomura economist Sonal Varma said in a note.
The benchmark five-year swap rate eased to 7.38 percent from 7.41 percent, while the one-year rate fell to 8.12 percent from 8.17 percent.
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