India?s five-year bonds gained for the first time in three days after crude oil prices fell almost 4% on Monday, tempering concern inflation will quicken. Bonds also gained as a decline in benchmark US bond yields to a one-week low on MOnday added to speculation borrowing costs will remain low globally.
?Five-year securities opened higher because crude oil had dropped yesterday,? said Anoop Verma, a fixed-income trader at Development Credit Bank Ltd. ?The decline in U.S. yields too was encouraging.?
The yield on the most-traded 6.07% note due May 2014 declined 4 bps to 6.61% at the close. The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, declined. The rate, a fixed payment made to receive floating rates, was 6.25%, compared to 6.32% on Monday.
The benchmark inflation index declined 1.61% in the week to June 6 from a year earlier after gaining 0.13% the previous week. The amount absorbed under LAF reverse repo operation was noted at Rs 1, 27,180 crore. The 10 year benchmark paper 6.05 % GOI 2019 (FEB) closed at a yield of 7.01%.