INDIA BONDS-India bonds rise, mirroring US Treasuries
By Khushi Malhotra
MUMBAI, Oct 13 (Reuters) - Indian government bonds rose on Monday, tracking a rally in U.S. Treasuries as softer inflation and lower-than-expected state debt supply bouyed sentiment.
The yield on the benchmark 10-year note IN063335G=CC settled at 6.5198%. It ended at 6.5370% on Friday.
Bond yields move inversely to prices.
On Friday, U.S. Treasury yields dropped to multi-week lows, with the 10-year US10YT=RR yield slumping nearly 10 basis points to 4.0510% after US President Donald Trump threatened to massively increase tariffs on Chinese imports.
Also aiding sentiment was India's annual retail inflation INCPIY=ECI slowing to 1.54% in September, an eight-year low, as food prices eased, government data showed on Monday.
That was slower than 2.07% in August and a 1.7% estimate in a Reuters poll .
Separately, Indian states are set to sell bonds worth 128 billion rupees ($1.44 billion) on Tuesday, boosting sentiment as it is lower than market expectations, traders said.
"Sentiment has improved with US Treasury yields falling, lower oil prices and inflation in line with expectations," Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank, said.
The 10-year yield eased 2 basis points on Monday, ending a two-day rising streak, but failed to hit 6.49%, a key technical level.
"We are waiting for the RBI to take action to help transmission in bond market," Dash added.
The market is also awaiting the minutes of the Reserve Bank of India's latest monetary policy meeting due on Wednesday to gauge the central bank's rate easing trajectory.
RATES
India's overnight index swaps (OIS) fell on Monday, tracking a dip in U.S. Treasury yields and as traders priced in a December rate cut.
The one-year OIS rate INR1YMIBROIS=CC fell 1.25 bps to 5.4275%, while the two-year rate INR2YMIBROIS=CC dropped 3 bps to 5.3575%. The five-year rate INR5YMIBROIS=CC also dipped 1.75 bps to 5.6350%.
($1 = 88.6810 Indian rupees)
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