India bond yields end higher, rise for second straight week
By Dharamraj Dhutia
MUMBAI, Nov 22 (Reuters) -Indian government bond yields ended higher on Friday and logged a second straight week of gains, boosted by a fresh supply in the weekly auction on the day and by domestic inflation concerns and elevated U.S. yields for the week.
The benchmark 10-year bond yield IN067934G=CC ended at 6.8470%, compared with its close of 6.8329% on Thursday. The yield has risen 2 basis points this week, after gaining 5 bps last week.
"Sentiment is weak now and the benchmark bond yield is expected to move towards 6.90% in the near term," said VRC Reddy, treasury head at Karur Vysya Bank.
New Delhi sold 220 billion rupees ($2.61 billion) of the benchmark bond, which will increase the liquidity in the paper and provide more opportunities for short sellers.
Yields have risen since the Reserve Bank of India (RBI) again highlighted inflation concerns on Wednesday, while persistent bond sales by foreign investors are also weighing on sentiment.
These sellers may not be in a hurry to return as the rupee is expected to remain under pressure and rate cuts seem to be delayed, Nitin Agarwal, head of trading at ANZ India, said earlier this week.
The RBI said it was worrying that core inflation has also edged up alongside a sharp surge in food prices. India's inflation accelerated to 6.21% in October, breaching the RBI's target range of 2%-6% for the first time in 14 months and dashing hopes of a rate cut in December.
Still, Reddy said hopes of a cut in February have risen after central ministers have called for lower rates.
Indian bond yields have also tracked the gains in U.S. Treasury yields -- the 10-year U.S. yield was above 4.40% on Friday -- as the odds of a rate cut next month dropped to 60%, from 72% last week, according to the CME FedWatch tool.
($1 = 84.4410 Indian rupees)
Reporting by Dharamraj Dhutia; Editing by Savio D'Souza
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