Bond yields eased on Monday after the news that Lawrence Summers had dropped from the race to head the Federal Reserve promised to prolong the tenure of super-easy money. Currently, the yields were trading flat after turning negative on the day on higher-than-expected WPI inflation. India's headline inflation hit a six-month high in August, driven by a surprise surge in food prices, hardening the case for central bank governor Raghuram Rajan to keep interest rates high at his first policy meeting later this week.
On the currency front, Indian rupee made another strong start on Monday along with other emerging market currencies on Lawrence Summers news. The dollar traded weak against a basket of major currencies on easing concerns about Fed’s stimulus programme.
On the global front, US Treasuries rose on Friday after weak economic data bolstered the view that Fed policymakers next week might slow an exit from the bond-buying program they designed to boost growth in the world's biggest economy. Meanwhile, brent crude futures fell by more than a dollar on Monday to a three-week trough below $111 a barrel as supply worries eased after the US agreed to call off military action against Syria in a deal with Russia to remove Damascus's chemical weapons.
Back home, the yields on 10-year 7.16% - 2023 bonds, were trading 6 basis points lower at 8.43% from its previous close of 8.49% on Friday.
The benchmark five-year interest rate swaps were trading 5 basis points lower at 8.30% from its previous close of 8.35% on Friday.
