Indian federal bond yields ended lower on Monday as a slowing supply pipeline supported demand, although higher-than-expected inflation data heightened expectations of an interest rate rise in coming months.
The yield on the 10-year benchmark bond IN069019G=CC ended at 7.56 percent, below Friday's closing of 7.58 percent, recovering from a rise to 7.59 percent after the inflation data.
Volumes were a heavy 103.35 billion rupees ($2.2 billion) on the central bank's trading platform.
"Today the rally has been actually short-circuited by the inflation data," said K. Ramkumar, head of fixed income at Sundaram BNP Paribas Mutual Fund, adding he expected the rally based on reducing supplies to continue for some more time.
Ramkumar said the market was already aware that rates would rise, the only question was when, and so the market would be driven more by demand and supply on a day-to-day basis.
India's wholesale prices rose faster than expected in November, and analysts said inflation worries could see the central bank withdraw more liquidity support in coming weeks and increase rates early next year. [ID:nSGE5BD0CC]
The government will sell 60 billion rupees of treasury bills on Wednesday and 90 billion rupees of bonds on Friday, including 20 billion rupees of 11-year floating rate bonds. [ID:nMBI006020]
"The floating rate instruments suits a lot of investors ideally, either for their ALM (Asset Liability Management) (or) reflecting their interest rate views," Ramkumar said.
After Friday's auction there will be a two-week gap before the next auction.
Excluding Friday's auction, the government is due to sell only 350 billion of bonds in the remaining fiscal year after selling 3.83 trillion rupees of bonds since the start of April.
In interest rate futures on the National Stock Exchange (NSE), the December contract N10Z9 was at 7.9581 percent, above its previous close of 7.8653.
The yield implied in the March contract N10H0 was 8.2239 percent, marginally down from 8.2570 percent.
The benchmark five-year interest rate swap ended at 6.81/84 percent, from previous close of 6.78/81 percent.
The yield on the 10-year benchmark bond IN069019G=CC ended at 7.56 percent, below Friday's closing of 7.58 percent, recovering from a rise to 7.59 percent after the inflation data.
Volumes were a heavy 103.35 billion rupees ($2.2 billion) on the central bank's trading platform.
"Today the rally has been actually short-circuited by the inflation data," said K. Ramkumar, head of fixed income at Sundaram BNP Paribas Mutual Fund, adding he expected the rally based on reducing supplies to continue for some more time.
Ramkumar said the market was already aware that rates would rise, the only question was when, and so the market would be driven more by demand and supply on a day-to-day basis.
India's wholesale prices rose faster than expected in November, and analysts said inflation worries could see the central bank withdraw more liquidity support in coming weeks and increase rates early next year. [ID:nSGE5BD0CC]
The government will sell 60 billion rupees of treasury bills on Wednesday and 90 billion rupees of bonds on Friday, including 20 billion rupees of 11-year floating rate bonds. [ID:nMBI006020]
"The floating rate instruments suits a lot of investors ideally, either for their ALM (Asset Liability Management) (or) reflecting their interest rate views," Ramkumar said.
After Friday's auction there will be a two-week gap before the next auction.
Excluding Friday's auction, the government is due to sell only 350 billion of bonds in the remaining fiscal year after selling 3.83 trillion rupees of bonds since the start of April.
In interest rate futures on the National Stock Exchange (NSE), the December contract N10Z9 was at 7.9581 percent, above its previous close of 7.8653.
The yield implied in the March contract N10H0 was 8.2239 percent, marginally down from 8.2570 percent.
The benchmark five-year interest rate swap ended at 6.81/84 percent, from previous close of 6.78/81 percent.
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