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Indian bond yields flat ahead of Tuesday's OMO
December 10, 2012 / 12:03 PM / 5 years ago

Indian bond yields flat ahead of Tuesday's OMO

* Bond yield ends flat at 8.17 pct
    * OMO demand seen strong on liquid papers; liquidity watched
    * IIP data on Wednesday, Inflation on Friday key

    By Archana Narayanan
    MUMBAI, Dec 10 (Reuters) - Indian federal bond yields were
unchanged on Monday as investors exercised caution ahead of open
market operations (OMO) and key data scheduled to be released
later in the week.
    Dealers are hoping that the Reserve Bank of India (RBI) will
buy most of the 120 billion rupees of debt it has offered to buy
at an auction on Tuesday. 
    The bonds include liquid papers, 8.07 percent 2017-July
bonds, 8.19 percent 2020 bonds, 8.13 percent 2022 bonds and 8.33
percent 2026 bonds. 
    "The next trigger for the market is the success of the OMO,
which is expected to see strong demand as the RBI is buying
liquid papers," said Anuj Tagra, a fixed income dealer with
state-run Union Bank of India.
    "With the deficit remaining in the vicinity of 1 trillion
rupees, there is likelihood of an OMO ahead too," Tagra said.
    Cash deficit in the banking system will be watched closely
as it is expected to tighten further on advance tax outflows
during this week.
    Banks borrowed 907.90 billion rupees from the RBI's repo
window on Monday. 
    The benchmark 10-year bond, which was in the
shut period on Friday, was flat at 8.17 percent from Thursday's
close.
    Crucial set of data to be released ahead in the week also
kept the market cautious.
    India will release factory output data for October on
Wednesday and the headline inflation data for November on Friday
-- two key data points ahead of the RBI's monetary policy
meeting on Dec. 18. 
    The country's industrial production index rose at its
fastest annual pace in nearly a year in October, after
unexpectedly contracting in September, aided by a statistical
spurt in infrastructure-related output, a Reuters poll found.
 
    India's short-end 1-year OIS rate ended rose 2 basis
points(bps) to 7.66 percent and the benchmark 5-year OIS was up
2 bps at 7.08 percent.

 (Editing by Anand Basu)

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