MUMBAI: Indian government bonds gave up intraday gains to end marginally lower on Friday as slightly weaker than expected cutoffs at Friday’s debt auction as well as the inability to break below a key level dampened the mood.
The benchmark 10-year bond yield still fell 3 basis points through Friday, its biggest decline in six weeks.
Demand for debt picked up early in the week in anticipation of dovish commentary from members of India’s rate-setting panel in the minutes of October’s policy meeting, which turned out to be as per expected lines.
The minutes included comments from RBI Governor Sanjay Malhotra on how the benign inflation outlook opens up policy space to further support growth.
The yield on the benchmark 10-year note ended at 6.5131% on the day after closing at 6.5000% on Thursday. Bond yields move inversely to prices.
“High likelihood of rate cut in forthcoming December policy bodes well for the steepening of yield curve,” said Vikas Garg, head of fixed income at Invesco Mutual Fund.
“However, by the time we go into December policy, we expect the whole curve to trend lower with 10-year yield expected to trade in 6.40%-6.50% range.”
New Delhi sold bonds worth 300 billion rupees ($3.41 billion) earlier in the day.
The inability to break the important technical level of 6.47% on the downside led to a wiping out of all intra-day gains, a trader with a primary dealership said.
RATES
India’s overnight index swaps (OIS) also ended off their intra-day lows, but the longer end dropped on a weekly basis as the chances of a Federal Reserve rate cut received a further boost.
The one-year OIS rate ended at 5.44% and the two-year rate closed at 5.38%.
The five-year swap rate dropped 4 bps for the week to end at 5.62%.
American Dollar Exchange Rate