| "The concern over inflation isn't something which will ease anytime soon'' said Poonam Tandon, chief of fixed-income at Securities Trading Corp. of India, a Mumbai-based primary dealer that underwrites debt sales. |
| "There will be another interest rate increase in the next six months. Interest rates will peak in another six months.'' |
| The Reserve Bank of India last week raised its overnight lending rate for the fifth time in a year to 7.5 percent to curb inflation stoked by the nation's record economic growth. A government report due Feb. 9 will show inflation accelerated to 6.48 per cent, the fastest pace since December 2004, according to the median estimate of a Bloomberg News survey. |
| The yield on the benchmark 8.07 percent note due January 2017 rose 4 basis points, or 0.04 percentage point, to 7.75 percent at the 5:30 p.m. close of trading in Mumbai, according to data compiled by Bloomberg. The price, which moves inversely to the yield, fell 0.26, or 26 paise per Rs 100 face value, to 102.17. |
| Bonds may gain in coming days on speculation the federal and provincial governments will step-up spending and boost cash in the banking system. That will help banks, the biggest buyers of debt securities, to buy bonds at the sale due later this week. |
| "I expect yields to drop because its typical of state and the federal government to spend more towards the end of the fiscal year in March,'' said S.P. Prabhu, head of fixed-income trading at IDBI Capital Market Services Ltd., a Mumbai-based primary dealer that underwrites government debt sales. "That will ease the cash shortage and help strengthen demand at the bond sale this week.'' |
| Bond yields may decline by as much as 10 basis points in the next few days, Prabhu said. The government will sell on February 9 via auctions Rs 6000 crore of the 7.37 percent note due 2014 and Rs 3000 crore of the 8.33 percent bonds maturing in 2036. |
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