September 11, 2013 / 11:54 AM / 4 years ago

Indian bonds gain for second day; rupee stability aids

* 10-year bond yield ends down 1 bp at 8.46 pct
    * Traders await factory output, CPI data on Thurs for cues
    * Mkt to remain volatile until U.S. Fed, RBI rate
decisions-traders

    By Swati Bhat
    MUMBAI, Sept 11 (Reuters) - Indian government bond yields
held in a tight range on Wednesday as the recent drop in global
crude oil prices and gains in the rupee cheered sentiment, but
upcoming data and key policy decisions kept a lid on further
gains.
    Traders expect market participants to remain guarded as
there could be further volatility with the U.S. Federal Reserve
and the Reserve Bank of India both expected to announce monetary
policy decisions next week.
    The upcoming data releases, factory output and retail
inflation on Thursday and wholesale inflation on Monday, will be
crucial for near-term direction, traders added.
    "Too early to say if we have seen a bottom for the markets
yet," said Harish Agarwal, a fixed income dealer with First Rand
Bank.
    "There are a lot of events lined up over the next 10 days,
so until then the market will remain volatile. We can expect to
see a wide 8.10 to 8.75 percent band on the 10-year bond." 
    The benchmark 10-year bond yield closed down
1 basis point at 8.46 percent. It moved in a range of 8.41
percent to 8.51 percent during the session.
    Traders said gains in the rupee helped market sentiment
during the day, but a rise in global crude oil prices in the
second-half of trade pulled yields off lows.
    Brent crude rose above $112 a barrel on Wednesday, after
falling more than 4 percent in the past two days as concerns
eased regarding an imminent U.S.-led military strike on Syria.
 
    In the overnight indexed swap market, the benchmark 5-year
rate and the 1-year rate both
closed up 4 bps each at 8.31 percent and 9.13 percent
respectively.

 (Editing by Prateek Chatterjee)

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