India bonds may continue to see selling pressure at start of week
ADVERTISEMENT The yield on the benchmark 10-year bond is likely to move between 6.33% and 6.37%, a trader at a private bank said, after closing at 6.3505% on Friday - the highest level since May 9.
"Traders are losing interest and not building fresh positions, and hence we witnessed a large selloff after the debt auction on Friday," the trader said.
The Reserve Bank of India sold 300 billion rupees ($3.47 billion) of the benchmark 2035 bond on Friday, the cutoff for which was in line with estimates, but the note witnessed selling pressure after the result was announced. Selling was exacerbated after the RBI governor's comments curbed expectations for rate easing, prompting those who were betting on an August cut to pare positions.
ADVERTISEMENT Sanjay Malhotra said monetary policy, being forward-looking, will place greater focus on the outlook for growth and inflation, rather than their current levels, when the policy panel meets on August 6. Malhotra added that the bar for further easing is higher than it would have been if the stance was accommodative, though the RBI still has the flexibility to move the rates up, down or pause.
ADVERTISEMENT A plunge in India's retail inflation to a more than six-year low and expectations that it will slip to a record low in July have led to increased talk of a rate cut in August.
ADVERTISEMENT India's overnight index swap rates rose on Friday, as market participants trimmed rate cut bets for next week.
The one-year OIS rate ended at 5.53% on Friday and the two-year OIS rate ended at 5.51%. The liquid five-year OIS rate settled at 5.73%. KEY INDICATORS: ** Benchmark Brent crude futures were 0.4% higher at $68.70 per barrel after easing 1.1% in the previous session ** Ten-year U.S. Treasury yield at 4.3938%; two-year yield at 3.9296% ($1 = 86.4750 Indian rupees).
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