Indian bonds mixed amid higher wholesale prices; likely to remain volatile ahead of FOMC meet

The Indian bonds traded mixed Wednesday amid higher wholesale prices in August. We foresee that Treasury prices are likely to remain volatile ahead FOMC monetary policy meeting.

The yield on the benchmark 10-year bonds, which moves inversely to its price, remained steady at 7.085 percent, the 5-year note yield also climbed 1/2 basis point to 6.948 percent, the super-long 30-year Treasury yield jumped 2 basis points to 7.259 percent and the short-term 2-year note yield dipped 2 basis points to 6.796 percent by 07:00 GMT.

India's annual rate of inflation based on wholesale prices moved up to 3.74 per cent in August, from 3.55 per cent in the month before. While an easing of consumer prices raised hopes of an interest rate cut by the newly-appointed Governor of the Reserve Bank of India (RBI), Urjit Patel in his debut monetary policy meeting next month, after a rise in wholesale prices faded such an expectation.

On Monday, India’s consumer price index (CPI) rose 5.05 percent in August from a year earlier, data released by the Ministry of Statistics showed Monday. That’s slower than the 5.2 percent median estimate in a Bloomberg survey of 35 economists and is a plunge from the previous month’s 6.07 percent rate.

“Next week’s FOMC meeting is set to be interesting given the recent divergent Fed speak. The dovish view appears to be in the ascendency for now. We expect no change in policy,” said ANZ in a research note.

Meanwhile, the Sensex fell 0.07 percent or 20.60 points to 28,332.94 and Nifty-50 futures traded 0.05 percent lower or 4.25 points at 8,743 by 07:10 GMT.