Indian 10-year bond yields hit near 2-week high as wholesale prices climb in December

Indian 10-year sovereign bond yields hits near 2-week high Monday as the country’s wholesale price index climbed at the fastest pace in two months amid lack of significant global cues. Also, the U.S. markets remain closed today on account of 'Martin Luther King Day'.

The yield on the benchmark 10-year bonds, which moves inversely to its price, rose nearly over 2 basis points to 6.44 percent, the yield on long-term 24-year note surged nearly 3 basis points to 7.04 percent while the yield on short-term 2-year note inched nearly 1-1/2 basis points higher to 6.34 percent by 08:05 GMT.

Retail inflation rose 3.41 percent in December from a year earlier, against 3.63 percent in November. The lower spread of cash transactions, coupled with a maximum limit on ATM withdrawals has pressurized the prices of many retail commodities, including luxuries and real estate prices as well.

It is worth noting that the benchmark 10-year yields fell nearly 160 basis points to 6.18 percent in 2016 as subdued inflation and negative impact of demonetisation raised expectations for the RBI rate cut. We at FxWirePro expect this is also likely to continue even in 2017.

India’s wholesale price index inflation accelerated to 3.39 percent in December from 3.15 percent in November, the government data showed. Reuters, in its economist poll, had forecast a rise of 3.5 percent in prices for the month. However, food articles inflation for the month was in negative, indicating a 0.7 percent fall in food prices in December as compared to 1.54 percent rise in the previous month.

Meanwhile, the 30-share benchmark Sensex traded 0.28 percent higher at 27,314.59, while the 50-share benchmark Nifty futures traded 0.23 percent or 20.65 points higher at 8,420.45 by 08:25 GMT.