Indian federal bond yields and swaps eased a tad on Thursday as rate cut hopes got a boost after China's manufacturing activity shrank, putting the spotlight on slowing growth in the region.
The absence of a debt sale this week also helped market sentiment, although traders were circumspect ahead of the government's borrowing calendar due next week for the fiscal year that begins on April 1.
At 10:34 a.m. (0505 GMT), the 10-year benchmark bond yield was down 1 basis point at 8.38 percent, after easing 2 bps on Wednesday. The yield is likely to move in a 8.37-8.42 percent band, traders said.
The total traded volume on the central bank's electronic trading platform was 14.85 billion rupees ($278.54 million), around the average volume in morning trade.
The benchmark five-year swap rate and the one-year rate eased 3 basis points each, to 7.54 percent and 8.14 percent, respectively.
"Yields are lower on China PMI, plus a follow through of yesterday's better closing," said Anoop Verma, associate vice-president at Development Credit Bank.
China's manufacturing sector activity shrank in March for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index showed.
With India's growth also slowing, traders said the Chinese data would add to expectations for a rate cut by the Reserve Bank of India at its scheduled meeting on April 17.
However, hopes for aggressive monetary easing have tempered on growing worries about inflation.
On Tuesday, the Reserve Bank of India Governor Duvvuri Subbarao said the central bank was worried about inflation in essential items.
India's headline inflation rose a faster-than-expected 6.95 percent from a year earlier in February, after a spike in vegetable prices fanned food inflation.
Foreign banks and brokerages including Standard Chartered, Nomura and Citibank have reduced their 2012/13 rate cut expectations on inflation risks emerging from higher oil prices.
Higher-than-expected 2012/13 borrowing target of 5.7 trillion rupees ($111.98 billion) may push up yields over the next two months, traders said.
The 10-year yield is likely to rise to 8.47 percent by month-end, said Ashish Vaidya, executive director and head of interest rates at UBS.
News Bureau,
The absence of a debt sale this week also helped market sentiment, although traders were circumspect ahead of the government's borrowing calendar due next week for the fiscal year that begins on April 1.
At 10:34 a.m. (0505 GMT), the 10-year benchmark bond yield was down 1 basis point at 8.38 percent, after easing 2 bps on Wednesday. The yield is likely to move in a 8.37-8.42 percent band, traders said.
The total traded volume on the central bank's electronic trading platform was 14.85 billion rupees ($278.54 million), around the average volume in morning trade.
The benchmark five-year swap rate and the one-year rate eased 3 basis points each, to 7.54 percent and 8.14 percent, respectively.
"Yields are lower on China PMI, plus a follow through of yesterday's better closing," said Anoop Verma, associate vice-president at Development Credit Bank.
China's manufacturing sector activity shrank in March for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index showed.
With India's growth also slowing, traders said the Chinese data would add to expectations for a rate cut by the Reserve Bank of India at its scheduled meeting on April 17.
However, hopes for aggressive monetary easing have tempered on growing worries about inflation.
On Tuesday, the Reserve Bank of India Governor Duvvuri Subbarao said the central bank was worried about inflation in essential items.
India's headline inflation rose a faster-than-expected 6.95 percent from a year earlier in February, after a spike in vegetable prices fanned food inflation.
Foreign banks and brokerages including Standard Chartered, Nomura and Citibank have reduced their 2012/13 rate cut expectations on inflation risks emerging from higher oil prices.
Higher-than-expected 2012/13 borrowing target of 5.7 trillion rupees ($111.98 billion) may push up yields over the next two months, traders said.
The 10-year yield is likely to rise to 8.47 percent by month-end, said Ashish Vaidya, executive director and head of interest rates at UBS.
News Bureau,
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