Pre WPI data release Scenario:
Bond yields treaded water ahead of the release of December month’s inflation, key print for cementing views on the likely central bank rate action at It’s upcoming third quarter monetary policy review on January 29, 2013.
On the global front, US Treasuries prices gained in choppy trading on Friday as investors struggled to find a new range for the debt, weighing a brighter economy against impending Washington budget battles. Meanwhile, Brent crude rose above $111 a barrel on Monday as fears of a disruption of supply from the Middle East resurfaced amid growing optimism over signs that the world's biggest economies are on their way to a steady recovery.
Closer home, the yields on 10-year 8.79% - 2021 were trading 1 basis point lower at 7.86% from its previous close of 7.87% on Friday.
The benchmark five-year interest rates were trading 1 basis point lower at 7.17% from its previous close of 7.18% on Friday.
Post WPI data release Scenario:
Bond yields dropped sharply after headline inflation slowed down to its lowest level in three years, hardening expectations for an interest rate cut by the central bank later this month to boost an economy that is set to post its slowest growth in a decade.
The yields on 10-year 8.79% - 2021 were trading 7 basis points lower at 7.80% from its previous close of 7.87% on Friday.
Slowing down to a three year low level, the wholesale price index (WPI), India's main inflation gauge, unexpectedly cooled down to 7.18% (Provisional) for the month of December, 2012 as compared to 7.24% for November and 7.74% during the corresponding month of the previous year. Further, the annual reading for the month of October also was revised lower to 7.32% from earlier of 7.45%.
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