May 30, 2012 / 1:12 PM / 5 years ago

India 10-yr bond yield flat; GDP key for direction

* Growth data due at 0530 GMT on Thurs

* Data will help determine interest rate outlook

* Traders suspect RBI bought long-end bonds

By Swati Bhat

MUMBAI, May 30 (Reuters) - India's benchmark 10-year bond yield ended steady on Wednesday ahead of key economic growth data that could help determine the outlook for interest rates.

The country is expected to say on Thursday the economy expanded at 6.1 percent in the January-March quarter, unchanged from the October-December quarter, and still the lowest growth levels in almost there years.

The performance could shape expectations about interest rate cuts after the Reserve Bank of India delivered last month a 50 basis point cut in the repo rate, though many analysts expect it to stay on hold until later in the year.

"The market has already factored in GDP coming below 6 percent, so the actual number and comments following it will be the next trigger," said Manish Wadhawan, managing director and head of interest rates at HSBC India.

"I expect the 10-year bond yield to hold in a 8.49 to 8.54 percent band in the near-term," he added.

The benchmark 10-year bond yield closed at 8.52 percent, unchanged from its Tuesday's close. It had risen to as high as 8.56 percent in opening trades, its highest since May 10.

Some traders cited heavy buying of bonds at the long-end, which they suspect could be from the central bank, in an attempt to infuse rupee liquidity and support debt prices.

The RBI is suspected to have recently purchased bonds in secondary markets, in addition to the open market operations it had conducted in each of the previous three weeks.

The latest data from the RBI shows they had bought a net 123.5 billion rupees worth of bonds in the week to May 18. Total volumes on the central bank's electronic trading platform were at a high 167.35 billion rupees.

One-year and five year overnight indexed swap rates both ended down 1 basis point each at 7.92 pct and 7.43 percent, respectively.

Swaps saw a receiving bias in late trade as investors bet on a weak GDP number that could prompt RBI to cut rates in June.

Global risk aversion and a sell-off in global commodity prices, with Brent below $106 per dollar, also aided receiving. (Reporting by Swati Bhat)

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