Bond yields edged lower as it was estimated that core inflation slowed despite the rise in WPI inflation; reinforcing expectations that the RBI will cut interest rates on March 19. Further, RBI Governor Subbarao's comments on the Union Budget being positive for fiscal consolidation also boosted rate cut hopes. On the whole, Subbarao's comments and the falling core inflation data calmed a jittery market after data on March 12 showed stronger-than-expected industrial output and accelerating consumer inflation.
Inflation based on WPI rose at 6.84% in February against an annual rise of 6.62% in January, but traders focused on the core inflation data, which slipped below the 4 percent mark for the first time in many months.
On the global front, US Treasury debt prices slipped on Wednesday on news of stronger-than-expected retail sales in February, but nearly all the day's losses were erased after the Treasury's sale of 10-year notes drew strong demand. Meanwhile, Brent crude fell on Wednesday on a larger-than-expected increase in US crude inventories, a firming dollar, and a forecast from the International Energy Agency that oil demand will shrink.
Back home, the yields on 10-year 8.79% - 2021 bonds were trading lower by 4 basis points at 7.86% from its previous close.
The benchmark five-year interest rate swaps were trading down by 2 basis points at 7.20% from its previous close on Wednesday.
