Bond yields edged up on Wednesday on supply concerns, while upbeat data from the European services sector kindled hopes the worst of the global recession is over and will diminish the lure of safe-haven bonds.
The 10-year benchmark bond yield, 6.09% maturing 2019, closed at 7.09%, above Tuesday?s 7.01%.The rupee crept to near two-month highs as a stronger stock market heightened expectations for more capital flows into the domestic market.
It ended at 47.52/53 per dollar, 0.44% stronger than 47.73/74 at close Tuesday when it hit 47.43 during trade, its highest level since June 12. The spread between 1- and 10-year government bonds has been widening since late April and peaked at a record 326 bps on July 24. The spread currently stands at 265 bps.
The benchmark five-year interest rate swap closed at 6.32/37%, little changed from the previous day?s 6.31/35%. ?Traders are on the sidelines as they expect yields to rise further,? said Sanjay Arya, deputy general manager of treasury at Bank of Maharashtra.
?The yield may rise to 7.10-7.15% levels in the medium term.? The central bank will buy back Rs 6,000 crore of bonds on Thursday, ahead of the government?s Rs 12,000 crore bond sale on Friday, part of the Rs 4.51 trn it plans to sell in 2009/10.
Call money rate closed unchanged as because banks continued to lend due to ample liquidity, dealers said. The five-day call money rate ended at 3.25-3.30%, unchanged from Tuesday?s close for one-day loans.