Indian bonds rise modestly on stronger rupee

The Indian government bonds traded modestly firmer on Friday as rupee continued to appreciate against the USD. Moreover, investors were also cautious ahead of bonds auction later in the session. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 0.003 percent to 7.469 by 0700 GMT.

India’s rupee headed for its biggest weekly advance since early April as local stocks jumped amid an emerging-markets rebound. The USD/INR is currently trading around 67.05. Moreover, the Indian bonds have been closely following developments in oil markets because of their impact on inflation expectations, as India imports 80 pct of its crude oil requirements. Today, crude oil prices fell below $50 mark after investors booked profit, as they considered whether higher prices could unlock more output in an already oversupplied market. Yesterday, crude oil prices crossed $50 mark for first time in seven months after the U.S. government reported a larger-than-expected drop in crude inventories. According to the US DOE, crude inventories decreased 4.2 million barrels, as compared to a build of +1.3 million barrels seen prior for the week ending 20 May. This came alongside an increase seen in gasoline inventories of +2.0 million barrels, from a draw of -2.5 million barrels seen prior and a decrease in distillate inventories of -1.3 million barrels, against a draw of -3.2 million barrels. The International benchmark Brent futures fell 0.85 pct to $49.17 and West Texas Intermediate (WTI) dipped 0.77 pct to $49.10 by 0530 GMT.

Meanwhile, The Reserve Bank of India (RBI) will auction 150 billion rupees of four government securities maturing in 2024, 2030, 2034 and 2055 today. The underwriting fee for the auction of 2055 paper was set at higher-than-expected levels yesterday, hinting at the possibility of a weak demand. The Sensex rose 0.77 pct or 201.86 points to 26,568.54 and Nifty-50 futures jumped 0.72 pct or 58 points to 8,140 by 0700 GMT.


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