10-Year Bond yield hits over 14-week high, rupee strengthens slightly against US dollar

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Gold Silver Reports — 10-Year Bond yield hits over 14-week high, rupee strengthens slightly against US dollar — India’s 10 year-bond yield on Wednesday hit over 14-week high after consumer price inflation accelerated for the second consecutive month, while the rupee strengthened marginally against the US dollar tracking gains in its Asian peers.

The 10-year bond yield was at 6.582%, a level last seen on 6 June, compared to its previous close of 6.554%. Bond yields and prices move in opposite directions.

Consumer price index (CPI)-based inflation continued to rise for the second consecutive month, by 3.36% to hit a five-month high from 2.36% a month ago as food inflation turned positive after three months of contraction.

“Going forward, as the base effect wades off and demand revives, inflation is expected to rise though remain near RBI’s inflation range. Thus, possibility of another interest rate remains unlikely in the next 3- 4 months,” said Edelweiss Investment Research in a note to its investors.

Core inflation (headline excluding food and fuel) came in at 4.47% in August as against 3.93% in July. Pick-up in momentum in food, commodity and fuel prices have added growth to the headline inflation. Also, awarding of HRA (house rent allowance) under the 7th Pay Commission and pent-up demand due to demonetisation has led to increase in inflation, Edelweiss expects.

Traders are cautious ahead of the wholesale price inflation (WPI) data due after 12.30pm.  WPI will be at 3.2% in August from 1.88% in July.

The rupee strengthened marginally against the US dollar, tracking gains in its Asian peers. The rupee opened at 64.02 a dollar. At 9.15am, the rupee was trading at 63.98 a dollar, up 0.09% from its Tuesday’s close of 64.04.

Data released by the Central Statistics Office showed index of industrial production (IIP) grew at 1.2% in July from a contraction of 0.2% a month ago.

The benchmark Sensex index rose 0.21% or 68.62 points to 32,227.28 So far this year, it has risen over 20%.

So far this year, the rupee has gained 6.06%, while foreign institutional investors bought $6.55 billion and $20.35 billion in equity and debt respectively.

Asian currencies were trading higher amid easing tensions with North Korea. South Korean won was up 0.19%, Singapore dollar 0.17%, Japanese yen was up 0.12%, China Offshore 0.11%, Malaysian ringgit, Thai Baht were up 0.11% while China renminbi was up 0.08%. However, Philippines peso was down 0.06%, Taiwan dollar 0.05%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 91.788, down 0.1% from its previous close of 91.882.  — Neal Bhai

10-Year Bond yield hits over 14-week high, rupee strengthens slightly against US dollar | Neal Bhai Reports | Gold Silver Reports