Bond yields tread water ahead of release of July IIP, August CPI data

Bond yields were treading water amidst prevailing caution ahead of the release of crucial macro-economic data such as July industrial output and August Retail inflation data. The street expects Industrial production to grow 1.8% from a year earlier in July, slower than June's 3.4% increase, while India's consumer price inflation, closely tracked by the Reserve Bank of India is expected to edge lower to 7.80% in August from July's 7.96%. However, any uptick of the yields is unlikely given the lower brent crude prices.

Meanwhile, bonds snapped two days of losses amidst speculation that the Reserve Bank of India might soon conduct its first buyback with markets, as part of the Rs 50,000 crore ($8.22 billion) set aside in the  2014/15 budget to switch shorter debt with longer-dated papers.

On the global front, U.S. Treasuries yields inched up on Thursday on the view that a strong retail sales figure on Friday could increase the potential for an earlier-than-expected rate hike from the Federal Reserve. Meanwhile, brent crude slipped below $98 a barrel on Friday, heading for its worst week in six as concerns over weak demand outweighed geopolitical worries in the Middle East and Ukraine.

Back home, the yields on new benchmark 8.40%- 2024 bonds were trading steady at Thursday’s close of 8.51% on Friday

The benchmark five-year interest rate swaps were trading 1 basis point higher at 8.02% from its previous close of 8.01% on Thursday.