Bond yields off high before auction result

MUMBAI: Indian federal bond yields were off early highs in afternoon trade on expectation of better cut-offs at the 130 billion rupees auction, but were steady at Thursday's close. At 1.52 pm, the yield on the 10-year benchmark bond was at 7.57 per cent, off from the day's high of 7.59 per cent and unchanged from its previous close.

"There was a rally just after submission of the bids at the auction as people now expect better cut-offs," said a dealer with a foreign bank.

The government will sell 50 billion rupees each of the 7.02 per cent bonds maturing in 2016 and 8.20 per cent, 2022 bond and 30 billion rupees of 8.26 per cent, 2027 bond later in the day.

A Reuters poll showed banks expect the central bank to set a cut-off of 7.70 per cent for 2016 bond, 7.94 per cent on the 2022 bond and 8.20 per cent on 2027 bond.

The 2016 bond is currently trading at 7.68 per cent, the 2022 bond at 7.91 per cent and the 2027 bond is at 8.19 percent.

Volumes were light at 36.7 billion rupees on the central bank's trading platform.

However overall sentiment stayed negative on liquidity concerns. Traders also preferred to remain light ahead of the employment data release in US, which could in turn impact the US Treasury yields.