(Updates to close)
MUMBAI, Dec 28 (Reuters) - Indian federal bond yields eased
to two-month lows on Friday on lower-than-forecast inflation and
expectations of a significant improvement in cash conditions in
the banking system by next week, traders said.
The yield on the 10-year federal bond ended at 7.81 percent,
its lowest since Oct. 30, according to Reuters data, and down
from the previous close of 7.84 percent.
India's wholesale price index rose 3.45 percent in the 12
months to Dec. 15, lower than a Reuters forecast of 3.69 percent
and the previous week's 3.65 percent.
The Reserve Bank of India holds its next monetary policy
review on Jan. 29 and is widely expected to keep its key lending
rate at 7.75 percent as headline inflation remains below its
comfort ceiling of 5.0 percent for the fiscal year to March.
"A low inflation helped sentiment to some extent. More
importantly, the central bank's bond purchases data made traders
more confident about taking positions," a trader at a foreign
bank said.
Data showed the central bank bought 8.85 billion rupees of
bonds in the week ended Dec. 21, compared with 22.3 billion
rupees in the week earlier. This is the third straight week it
has bought bonds in the secondary market.
Cash tightened this month after corporates paid an estimated
350 billion rupees in quarterly taxes. Some of the funds are
expected to return to the system in the form of government
spending, which could ease the cash squeeze, traders said.
Overnight call money rates <INROND=> traded at 7.60-7.70
percent, steady from the previous close. Call rates trade near
6.0 percent, the central bank's short-term reverse repo rate,
when cash conditions are comfortable.
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MARKET SNAPSHOT
Bombay Sensitive Index <.BSESN>
Indian rupee (/$) <INR=IN>
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($1 = 39.4 rupees)
(Reporting by Anurag Joshi, Editing by Mark Williams )
(([email protected]; Tel: +91 22 6636 9038; Reuters
Messaging: [email protected]))
Keywords: MARKETS INDIA MONEY