Indian rate swaps higher on inflation worries

MUMBAI, June 24 (Reuters) - Indian overnight indexed swaps rose on Tuesday, on renewed paying pressures driven by concerns inflation may not ease in coming weeks, despite monetary tightening by the central bank.

At 4:20 p.m., the five-year swap rate was at 9.54/9.58 percent, higher than Monday's close of 9.40/9.47 percent.

"Inflation still remains a strong concern. The RBI governor's comments yesterday momentarily soothed sentiment," a trader with a foreign bank said.

The RBI Governor Yaga Venugopal Reddy signalled on Monday it would tighten policy to fight inflation, but calmed bond market expectations that an aggressive interest rate rise was imminent. See: [ID:nBOM124879].

Official data last Friday showed annual inflation rate jumped to a 13-year high of 11.05 percent in early June, way above market expectations.

Finance Secretary D. Subbarao said over the weekend that more monetary action might be needed to tame inflation, making traders jittery.

The central bank had earlier this month raised its key lending rate by 25 basis points to 8 percent, which was its first rate increase since March 2007. (Reporting by Anurag Joshi; Editing by Ramya Venugopal)