Yields drop to 2-week low

Written by Agencies | Mumbai | Updated: Mar 1 2009, 04:11am hrs
Bond yields fell to their lowest in almost two weeks on Friday after data showed economic growth slumped to a near six-year low in the December quarter and raised expectations of early rate cuts.

The yield on the 8.24% bond maturing in 2018 ended at 6.34%, off an early trough of 6.30%, its lowest since February 16, but 17 bps lower than Thursday's close of 6.51%. Volumes on the central bank's trading platform were heavy at Rs 9,325 crore, with the 2018 bond the most heavily traded. "The low GDP data has heightened expectations that a rate cut is round the corner," a dealer with a private bank said. India's economy grew 5.3% in the December quarter from a year earlier, slowing sharply from the previous quarter's 7.6% as the global economic crisis cut demand and exports, official data showed.

Analysts said the weak growth data made it unlikely expansion in the full fiscal year to end March would reach the government's estimate of 7.1%, and could encourage the central bank to cut policy rates as early as this weekend. The RBI kept its key rates unchanged at its policy review on January 27, after lowering them and banks' cash reserve requirements aggressively since mid-October.