Indian Government Bonds trade firm - ICICI Bank Global Markets

Indian Government bonds traded firm in early trade after the RBI yesterday announced the auction of a new 10-year benchmark bond this week. Gilts surged in subsequent trade as WPI inflation dipped sharply in April to the lowest level since December 2009, boosting rate cut expectations. Meanwhile, the core inflation also eased to a 38-month low of 2.8% YoY. The benchmark 8.15% 2022 bond yield closed at a record low of 7.48%, as against yesterday's close of 7.59%.

India's call rate closed at 7.25%, lower than previous close of 7.30%. The RBI injected INR 1097.80 bn (gross) into the banking system today, as against INR 904.20 bn (gross) yesterday.

US Treasuries are trading higher as weak German confidence data provided some support to the safe haven bonds. Value buying after the benchmark yield rose by 15 bps in the last three sessions further aided the gains. However, the upside was capped amidst comments by Fed official Plosser that declining US inflation "doesn't warrant a Fed policy response". The 10-year yield is currently trading at 1.90% lower than the previous close of 1.92%.

Source : Equity Bulls

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