The government bond yields rose on Monday, a day before the central bank's policy review at which it is widely expected to raise the repo rate to further bolster itsinflation fighting credentials. Dealers are waiting to see whether the central bank signals a further increase in repo rates, which could spark a sell-off in the debt markets.
Post trading hours, the central bank said in a report it is important that monetary policy keeps a tight leash to prevent price shocks from getting generalised.
The Reserve Bank of India is expected to raise the repo rate by 25 basis points for a second consecutive month, but it is also expected to cut the marginal standing facility (MSF) rate by 25 basis points. "We are expecting a 25 bps hike in the repo and an equivalent cut in the MSF rate.
The market will closely watch the guidance of the central bank," said R.Sivakumar, head of fixed income at Axis Mutual Fund. The benchmark 10-year bond yield closed 8 bps higher at 8.66 per cent.
It moved in a range of 8.58 per cent to 8.67 per cent during the session. Tuesday's review comes in the backdrop of benign global cues as the Federal Reserve is now expected to hold on to its extraordinary monetary stimulus till 2014 as data out of the United States continues to remain weak. The rupee has recovered 12 per cent since its life low of 68.85 to the dollar on Aug. 28, giving room to the central bank to move further away from its measures to stabilise the rupee.
In the overnight indexed swap market, the benchmark five-year swap rate closed 5 bps up at 8.24 per cent while the one-year rate ended 6 bps higher at 8.43 per cent.
Post trading hours, the central bank said in a report it is important that monetary policy keeps a tight leash to prevent price shocks from getting generalised.
The Reserve Bank of India is expected to raise the repo rate by 25 basis points for a second consecutive month, but it is also expected to cut the marginal standing facility (MSF) rate by 25 basis points. "We are expecting a 25 bps hike in the repo and an equivalent cut in the MSF rate.
The market will closely watch the guidance of the central bank," said R.Sivakumar, head of fixed income at Axis Mutual Fund. The benchmark 10-year bond yield closed 8 bps higher at 8.66 per cent.
It moved in a range of 8.58 per cent to 8.67 per cent during the session. Tuesday's review comes in the backdrop of benign global cues as the Federal Reserve is now expected to hold on to its extraordinary monetary stimulus till 2014 as data out of the United States continues to remain weak. The rupee has recovered 12 per cent since its life low of 68.85 to the dollar on Aug. 28, giving room to the central bank to move further away from its measures to stabilise the rupee.
In the overnight indexed swap market, the benchmark five-year swap rate closed 5 bps up at 8.24 per cent while the one-year rate ended 6 bps higher at 8.43 per cent.
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