Bond yields rose on Thursday, fully offsetting the recent surge in US Treasury yields ahead of next week’s Fed meeting, while the rupee rose as risk appetite around the world recovered. The 10-year benchmark yield of India rose 8 basis points to 7.16%. It fell to a low of 7.04% earlier this week, the lowest level since the central bank of India paid attention to controlling inflation in its April 8 policy review. This is also the biggest increase in 10-year Treasury yields in a single session since April 8.
“The market is unstable. One day there is a riskoff trade and the very next day there is riskon. Indian markets are likely to closely track what happens globally until the Fed meeting next week,” a senior trader at a private bank said. US treasury yields rose at the long end on Wednesday after the prior day’s rally as investors awaited greater clarity on the “restrictive” policy the Federal Reserve plans to pursue next week to combat inflation by curbing economic growth. The Reserve Bank of India on its part is seen raising its repo rate in June and hiking at a faster pace than predicted just a few weeks ago as a surge in inflation is likely to put pressure on it to act quicker, a Reuters poll showed earlier this week.
The rupee closed trade at 76.48 per dollar compared to its close of 76.5325, tracking gains in the domestic share market and on expectations of dollar inflows towards the country’s largest initial public offering. Indian shares rose and stocks across the board rallied as risk appetite improved globally on the back of upbeat technology earnings in the United States. The country expects to raise up to $2.74 billion from selling a 3.5% stake in Life Insurance Corp’s (LIC) IPO, according to a prospectus filed late on Tuesday, just a third of its original hopes. “We may see rupee testing 77 levels once, after which we could see some opportunistic (dollar) selling happening to bring it once again to the positive territory,” said Heena Naik, research analyst for currency at broking firm Angel One Ltd. “Not forgetting, the upcoming IPOrelated inflows that could give a further boost to the currency,” she added.
