Bond yields witness improvement post weekly Inflation data

Pre Weekly Food Inflation Data:

Bond yields continued their losing streak for fourth straight session on Wednesday boosted by an overnight drop in U.S. yields and easing global crude oil prices. The bonds prices have gone up ever since finance ministry official said early this week that the 10-year bond yield was too high and he expected it to come down to about 8.20 percent levels.

On the global front, the US Treasury yields fell on Wednesday as prices rose, but traders were wary of the rally's speed, and some wondered whether a pullback might be in store for the market on Thursday. Meanwhile, Oil prices fell more than $2 on Wednesday as concerns that slowing economic growth will curb petroleum demand were reinforced by disappointing reports on U.S. private sector employment and manufacturing. Back home, traders will also be eying the weekly food and fuel inflation data for further cues.

The yields on 10-year benchmark; the 7.80%-2021 were at 8.27% down from Wednesday’s close of 8.32%.

The benchmark five-year interest rate swaps were trading lower at 7.92% down from Wednesday’s close of 8.04 %.

The Government of India have announced the sale (re-issue) of three dated securities for Rs 12,000 crore on June 3, 2011, which includes (i) “7.59 percent Government Stock 2016” for a notified amount of Rs 3,000 crore (nominal), (ii) “8.13 percent Government Stock 2022” for a notified amount of Rs 6,000 crore (nominal) and (iii) “8.28 percent Government Stock 2032” for a notified amount of Rs 3,000 crore (nominal) through price based auctions. The auctions will be conducted using uniform price method.

Post Weekly Food Inflation Data:

India's food Inflation after soaring to its four week's high level in the previous week has eased considerably to 8.06% on annual basis during week-ended May 21, 2011 on the back of cheaper pulses, wheat and some vegetables. According to the data released by the ministry of commerce and industry on Thursday, food price index declined to 8.06% on annual basis during week-ended May 21, from an annual rise of 8.55% recorded in the previous week. Meanwhile, the index of 'Food Articles' declined by 0.2% to 186.3 (Provisional) from 186.7 (Provisional) during the previous week due to lower prices of poultry chicken (7%), barley (3%), fish-marine and maize (2% each) and arhar, urad, egg and fruits & vegetables (1% each).  However, the prices of bajra (3%), gram (2%) and milk, jowar and ragi (1% each) moved up.

The index for 'non-food articles' group declined by 0.1% to 183.3 compared with 185.2 for the previous week due to lower prices of logs and timber (34%), raw silk (7%), gingelly seed and gaur seed (5% each), raw rubber (3%), mesta (2%) and fodder, raw jute, sunflower and niger seed (1% each).  However, the prices of rape and mustard seed (3%), soyabean (2%) and castor seed (1%) moved up. As a result, the broader 'primary articles' index, which has a weight of 20.12% in the overall wholesale price index (WPI) declined by 0.4% to 191.7 from 192.4 seen in the previous week. The annual rate of inflation, calculated on point to point basis, for this group stood at 10.87% for the week ended May 21 as compared with 11.60% in the previous week.

The index for 'fuel and power' with a weight of 14.91% in overall WPI rose by 0.4% to 160.7 from 160.1 for the previous week due to higher prices of petrol (9%) and bitumen (4%).  However, the prices of aviation turbine fuel (3%), naphtha (2%) and light diesel oil (1%) declined. The annual rate of inflation for this group, calculated on point to point basis, stood at 12.54% (Provisional) for the week ended May 21, 2011 as compared to 12.11% for the previous week.

The yields on 10-year benchmark; the 7.80%-2021 were down at 8.29% from Wednesday’s close of 8.32%.

The benchmark five-year interest rate swaps were trading down at 7.94% from its previous close of 8.04% in Wednesday.