Bond yields edged lower on Friday as a recovery in the rupee lifted sentiment. Some support also came with Finance Minister Arun Jaitley statement that drawing any conclusions on the basis of monsoon predictions on inflation or some kind of distress situation is far-fetched.
The yields rose as much as 18 basis points from a week ago as fears of a drought add to a growing list of risks facing a country that until recently had been one of the world's best emerging market performers. Besides, a drought could also reduce chances the RBI will cut interest rates again after it eased the repo rate by 25 basis points on June 2, even as the economy is struggling. That’s the biggest weekly increase for benchmark 10-year debt since April 2014.
In the global markets, U.S. Treasury debt yields hit seven-month highs on Wednesday, bolstered by a solid U.S. private sector employment report for May and gains in German bond yields after the European Central Bank raised its inflation forecast for this year. Meanwhile, Oil prices moved sideways in cautious trading early on Friday ahead of an OPEC decision likely to keep the market oversupplied and setting aside warnings of a second lurch lower in prices as some members like Iraq and Iran look to ramp up exports.
Back home, the yields on 10 year Government Stock was trading 2 basis points lower at 7.99% from its previous close of 8.01% on Thursday.
The benchmark five year yields was trading down 2 basis points at 8.02% from its previous close of 8.04% on Thursday.
The Reserve Bank of India has announced the auction of 91-days and 182-days Government of India Treasury Bills for notified amount of Rs 9,000 crore and Rs 6000 crore respectively. The auction was conducted on June 03, 2015 using 'Multiple Price Auction' method.