India bond yields rise after debt auction, end week lower
bond yields ended marginally higher on Friday as debt auction added to overall supply, while market participants shrugged off domestic growth numbers, which came largely in line with expectations.
The benchmark 7.26% 2033 bond yield ended at 7.1671%, after closing the previous session at 7.1655%. The yield, however, ended the week 3 basis points lower.
New Delhi raised 390 billion rupees ($4.72 billion) through the sale of bonds, at cutoffs that nearly met estimates.
However, some mutual funds were selling longer-duration papers after the auction results, traders said.
«The 10-year bond yield should peak in September as demand-supply dynamics are expected to improve from October.
Markets will closely track inflation and liquidity situation,» said Debendra Kumar Dash, senior vice-president, treasury, AU Small Finance Bank.
The domestic benchmark bond yield hit a near four-month high of 7.26% in August, tracking a rise in U.S. Treasuries, but eased as the month progressed.
India's economy grew at its quickest pace in a year in the April-June quarter and gross domestic product expanded 7.8% on an annual basis, accelerating from the 6.1% growth recorded in the March quarter.
Following a spike in India's retail inflation to a 15-month high of 7.44% in July from 4.87% in June, led by vegetable prices, traders now await the inflation trajectory in coming months.
Earlier this week, the government cut cooking gas prices by about 18%, a move that will have a 30-bps impact on the September inflation print, according to economists.
The inflation rate will remain above 6%, the RBI's upper tolerance band at least until October, according to a Reuters poll.
The market has suggested that the government shift more supply in the 30-40
