Indian bond yields up on profit taking, RBI talk

Indian federal bond yields snapped a two-day losing streak on Friday and ended higher on profit taking ahead of the weekend, also supported by slightly hawkish words from the Reserve Bank of India (RBI) governor.

The yield on the 10-year benchmark bond ended at 7.19 percent, two basis point above Thursday's close.

Volumes were a high Rs 126.25 billion (USD2.7 billion) at the central bank's reporting platform.

It fell as low as 7.14 percent in early deals, its lowest since Sept. 29, as risk aversion dominated market sentiment after Dubai's debt problems revived concerns about the health of the global financial system.

RBI governor said on Friday that there was no benign policy option and that inflationary pressures were building up.

"Investors saw better opportunity to book their profits when the yield fell below 7.15 percent," said MT. Premanand Kamath, treasury head at state-run Corporation Bank.

"They also wanted to stay light ahead of the weekend and an expected auction announcement."

After the market closing, the government announced the sale of 100-billion rupees federal bonds, to be auctioned on Dec. 4. It will also sell 55 billion rupees of treasury bills next Wednesday.

Bonds opened the day on a positive note, tracking global cues, especially on the back of news from Dubai, traders said.

Dubai said on Wednesday it wanted creditors of Dubai World and property group Nakheel to agree a debt standstill as it restructures Dubai World, the conglomerate that spearheaded the emirate's breakneck growth.

"The news raised doubts about the health of the financial system, but we need more details to analyse the real impact," said a senior trader at a state-run bank.

In interest rate futures on the National Stock Exchange (NSE), the December contract implied a yield of 7.9977 percent, below its previous close of 7.9869 percent.

The yield implied in the March contract was 8.1961 percent, higher than its previous close of 8.1406 percent.

The benchmark five-year swap closed at 6.41/45 percent, above its previous close of 6.40/44.