Indian Bonds Jump ahead of December Consumer Inflation Data

The Indian government bonds jumped in afternoon session Thursday as investors remain keen to watch the December consumer price inflation data, due to be released today, post market hours. A weak reading is likely to pressurise the Reserve Bank of India (RBI) to adopt an easing monetary policy stance in the months ahead.

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell 1-1/2 basis points to 6.38 percent, the yield on long-term 19-year note also dipped 1/2 basis point to 6.98 percent and the yield on short-term 2-year note slid 1 basis point to 6.32 percent by 08:00 GMT.

It is worth noting that the benchmark 10-year yields fell nearly 160 basis points to 6.18 percent in 2016 as subdued inflation and negative demonetisation raised expectations for the RBI rate cut. We at FxWirePro expect this is also likely to continue even in 2017.

In addition, the country’s inflation is anticipated to have eased further in coming months due to adoption of demonetisation. This masterstroke brought in a pool of electronic transactions that deprived many of hand-to-hand cash exchanges, thus leaving the citizens in a wide array of lower spends overall.

The lower spread of cash transactions, coupled with a maximum limit on ATM withdrawals has pressurized the prices of many retail commodities, including luxuries and real estate prices as well.

Lastly, the Government of India has announced the sale of following bonds amounting to Rs 110 billion on January 13, 2017 through multiple price based auction.

Meanwhile, the benchmark 30-share Sensex traded up 0.29 percent at 27,218 while the 50-share Nifty futures traded 0.20 percent or 16.30 points higher at 8,397.45 by 08:30 GMT.

The material has been provided by InstaForex Company – www.instaforex.com

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