Bonds sank after central bank official’s hawkish tone thwarted a 50 basis points rate cut hopes in RBI’s upcoming monetary policy review on June 18, 2012. Central bank’s governor, Duvvuri Subbarao, said inflation cannot be controlled without sacrificing growth in the near-term.
On the global front, benchmark US Treasury bonds were treading water in Asia on Friday, as investors awaited this weekend's election in Greece which could determine whether the country fate in the euro zone. However, reports stating the plans for coordinated central bank action to stabilize financial markets after Sunday's election reassured some investors, and took away some incentive to buy bonds ahead of the vote's outcome. Meanwhile, Brent futures extending gains rose towards $98, after producer group OPEC agreed to keep its output target unchanged for the second half of the year.
Back home, the yields on 10-year benchmark 8.79% - 2021 were trading 2 basis points higher at 8.36% from its previous close of 8.34% on Thursday.
The benchmark five-year interest rate swaps rose 2 basis points to 7.18% from its previous close of 7.16%.
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