Bonds rise four sessions in a row; debt sale oversubscribed

MUMBAI: Bonds rose for the fourth straight session, sending benchmark yields tumbling to a fresh 14-month low on expectations the central bank would cut policy rates as early as next month, while falling crude prices aided sentiment.

Foreign investors continued to buy, with net purchases of Indian debt in the last 15 out of 16 trading sessions. On Monday, foreign institutional investors bought $15.85 million worth of bonds, as per regulatory data.

The gains came despite the Reserve Bank of India's move to drain liquidity in the system through the sale of 103.45 billion rupees ($1.68 billion) worth of debt via open market operations and call rates trading at 8.00/8.05 percent, signalling investors were not worried about cash flow.

"At current levels, the market is factoring in a 25 basis point rate cut in the next policy," said Baljinder Singh, a senior dealer with Andhra Bank in Mumbai.

"I don't see a sharp rally from here unless there is an external factor like comments from the RBI or a sharp correction in oil prices."

The benchmark 10-year bond yield closed 7 basis points lower at 8.19 per cent on Wednesday, its lowest level since Aug. 12, 2013.

The yield had closed at 8.26 per cent on Monday.

Markets will be shut Thursday for a public holiday.

Some analysts believe consumer price inflation, which at 6.46 per cent in September had slowed to its lowest level since the data was first published in January 2012, will continue to ease.

The slide in oil prices, with Brent crude falling for a fifth straight day towards $82 a barrel, supported sentiment.

India's five-year swap rate ended down 6 basis points at 7.36 per cent, while the one-year rate fell 5 basis points to 7.97 per cent.

($1 = 61.4800 rupees)