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India 10-year bond yield slips to two-month low; exit polls awaited

LiveMint logoLiveMint 12-05-2014 Neha Dasgupta

Mumbai: India’s government bonds rose for a third consecutive session on Monday, sending the 10-year benchmark bond yield to a two-month low, on expectations that results of exit polls later in the day would show the Bharatiya Janata Party (BJP) and its allies winning a majority.

The gains tracked a rally in Indian shares and the rupee.

Traders expect the 10-year yield to fall further if exit polls, due out after 6.30pm, show the BJP-led coalition ahead in the election. The optimism comes even as exit polls in previous elections have proved to be incorrect, indicating investor hopes that the BJP, seen by markets as being more business friendly, will help spark a recovery in an economy growing at its slowest in a decade.

The exit polls may overshadow the consumer price inflation data, the last one before the Reserve Bank of India’s next policy review on 3 June. “Much of the exuberance seems to have been factored in. However, if exit polls surprise by showing a clear margin of victory, then yields could fall up to 10 basis points (bps),” said Pradeep Madhav, managing director at STCI Primary Dealership Ltd.

The benchmark 10-year bond yield ended down 2 bps at 8.73%, after falling as much as 4 bps during the session to 8.71%, a level last seen on 13 March. India’s benchmark five-year overnight swaps ended down 1 bp at 8.24%, after hitting a session low of 8.22%, a level last seen on 24 January. The five-year OIS has fallen 39 bps since hitting a 2014 high of 8.63% on 28 February.

The one-year rate ended down 1 bp at 8.50%, after earlier dropping to an over three-month low of 8.49%, a level last seen on 28 January. Reuters

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