Bonds at a month low on tapering

Written by Reuters | Mumbai | Updated: Jan 31 2014, 09:35am hrs
Government bonds fell to a near one-month low on Thursday as the rupee weakened in line with emerging market currencies after the US Fed further pruned its monetary stimulus. Foreign funds have been net sellers in Indian debt in five of the last six sessions through Wednesday to the tune of nearly $1 billion.

Bonds are broadly tracking the rupee. Dealers are a bit cautious in taking long positions because of the uncertainty of how the emerging markets react to the Fed move, said Harish Agarwal, dealer at First Rand Bank in Mumbai.

The benchmark 10-year bond yield closed at 8.82%, 5 basis points higher on the day. It rose to 8.85% in the session, its highest level since Jan. 3.

Interest rate swaps continued to rise in line with bond yields. The one-year rate rose to its highest in two-and-half months before ending at 8.69%, up 11 bps. The benchmark five-year swap rate closed 12 bps higher at 8.45%.