India 10-year bond yield reverses half of last week's drop on elevated inflation
TLT•India’s benchmark 10-year bond yield rose 6.12 basis points on Friday to 7.3079%, up 12 basis points for the week, as inflation in India and the United States clouded the interest-rate outlook.
1. Bond yields rise
Indian government bonds fell for a third straight session on Friday. The benchmark 6.94% 2036 bond yield ended at 7.3079%, compared with 7.2467% on Thursday; it rose 12 basis points this week after falling 22 basis points last week.
2. Inflation and auction
India’s retail inflation accelerated to 6.09% in October from 5.54% in September, above the upper tolerance band of the Reserve Bank of India’s target. The central government sold 340 billion rupees ($3.61 billion) of the benchmark bond, taking its outstanding issuance to a record 2.72 trillion rupees.
3. US rate outlook
The 10-year US Treasury yield was around 5.12%, up 26 basis points for the week. Traders priced in a 14% chance of a 50-basis-point Federal Reserve rate increase on December 9, up from zero a week earlier. Indian overnight index swap rates rose around 13-17 basis points for the week.
