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Indian bonds tread water ahead of inflation
March 14, 2012 / 5:42 AM / 6 years ago

Indian bonds tread water ahead of inflation

* February inflation due around 0630 GMT
    * Analysts expect RBI to hold rates on Thursday
    * Government borrowing for next fiscal year awaited

 (Updates to mid morning)	
    MUMBAI, March 14 (Reuters) - Indian federal bonds
yields were little changed on Wednesday  ahead of the monthly
inflation data around 0630 GMT, which is expected to provide
clues on the central bank's policy review on Thursday.	
    Global factors including higher oil prices and a rise in
U.S. Treasury yields also kept traders wary.	
    At 10:45 a.m. (0515 GMT), the 10-year benchmark bond yield
 was at 8.33 percent, up 1 basis point from
Tuesday's close.	
    Economists expect headline inflation to
accelerate to 6.79 percent in February from a year earlier,
faster than January's 6.55 percent, a Reuters poll showed on
    Brent crude prices steadied above $126 a barrel, near an
11-month high hit on Tuesday, aided by improving economic
sentiment in the United States, the world's top oil consumer.
    A moderate inflation could build a case for a rate cut, but
the Reserve Bank of India would want to see the government's
borrowing plan in the budget on Friday before taking a decision,
said Shakti Satapathy, fixed income strategist at A.K. Capital
    Traders have been shying away from building positions on
concerns the government's borrowing would be heavy in the
financial year starting on April 1.	
    The RBI will likely leave its key repo rate 
unchanged at 8.50 percent, 17 of 20 analysts polled by Reuters
on Monday said. In a January poll, 8 of 22 respondents had
forecast a cut by the end of March. 	
    "The bank risks losing credibility if it cuts rates this
week despite rising crude oil prices and uncertainty over fiscal
discipline," said Rajeev Malik, senior economist at CLSA in 
    The benchmark five-year swap rate rose 3
basis points to 7.51 percent, while the one-year rate firmed
 firmed 2 basis points to 8.09 percent.	
 (Reporting by Archana Narayanan; Editing by Ranjit Gangadharan)

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