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UPDATE 1-Indian bonds rally on rate cut hopes after govt's reforms
September 17, 2012 / 5:28 AM / 5 years ago

UPDATE 1-Indian bonds rally on rate cut hopes after govt's reforms

* 10-yr bond yield down 6 bps at 8.12 pct
    * 1-yr swap drops 13 bps to 7.60 percent
    * Rate cut hopes revived after govt reforms

    MUMBAI, Sept 17 (Reuters) - Indian federal bond yields and
one-year swaps fell sharply on increased bets the central bank
will cut interest rates later on Monday after the government
embarked on aggressive reform measures.
    After sharply increasing the price of heavily subsidized
diesel on Thursday, the government on Friday opened up the
country's supermarket sector to foreign chains and allowed more
foreign investment in airlines and broadcasters. 
    Despite stronger-than-expected inflation data on
Friday, analysts expect the Reserve Bank of India to ease
monetary policy given the central bank was seen waiting for
definite signs of fiscal reforms.
    "The market is expecting a dovish RBI with significant
easing as the pre-condition of government to move on fiscal
reforms has been partially met," said Anuj Tagra, a fixed income
dealer with state-run Union Bank of India.
    The benchmark 10-year bond yield fell as
much as 6 basis points to 8.12 percent, near a July 26 low
touched on Friday. It was still trading at 8.12 percent as of
0522 GMT.
   The 1-year OIS rate, which is a close
barometer of near-term rate expectations fell 13 bps to 7.60
percent, its lowest since July 25, while the 5-year OIS
 eased 7 basis points to 7.14 percent.

 (Reporting by Archana Narayanan; Editing by Rafael Nam)

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