Traders now await debt supply on Friday, where the government will raise 280 billion rupees through the sale of bonds and include 120 billion rupees of the 7.26% 2033 note, which will replace the existing benchmark soon. The 10-year benchmark bond had outstanding short positions at over 110 billion rupees ($1.33 billion) after India's inflation data, traders said. Earlier this week, sentiment in the local bond market turned bearish after data showed retail inflation in January jumped to 6.52%, rising above the Reserve Bank of India's upper threshold for the first time since October. The data followed last week's monetary policy of the central bank where the RBI raised the repo rate for the sixth consecutive time by 25 bps to 6.50%, and kept the door open for more tightening after saying that core inflation stayed "sticky". Market participants have now started expecting another 25 basis points hike in lending rate in April, with the one-year overnight indexed-swap rate, often seen as the clearest indication of future policy rates completely factoring in the hike, analysts said.
Meanwhile, headline consumer prices in the U.S. showed
inflation increased 0.5% month-over-month, after rising 0.1% in
December, leading markets to bet the Federal Reserve was most
likely to raise interest rates twice by 25 basis points in the
next three months.
($1 = 82.7690 Indian rupees)
(Reporting by Dharamraj Dhutia
Editing by Nivedita Bhattacharjee)
