Wednesday, May 18, 2022
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10-yr yield at near 3-yr peak on inflation surge; debt sale later

MUMBAI: India’s benchmark 10-year bond yield rose to fresh three-year highs on Wednesday morning following a sharper-than-expected jump in retail inflation in March, with sentiment also bearish ahead of a debt sale later in the day.
The 10-year bond yield was trading at 7.23% at 0450 GMT, after rising to 7.28% earlier, its highest since May 22, 2019. The bonds had ended the previous session at 7.19%.
Annual consumer price-based inflation (CPI) in March touched 6.95%, its highest in 17 months, pushed by rising prices of fuel products and some food items. The rate was higher than the 6.35% year-on-year forecast by economists in a Reuters poll, and 6.07% in the previous month.
“With the monetary policy committee having signalled an imminent stance change, the rate hike cycle may begin as early as June 2022, if the next CPI inflation print doesn’t significantly cool off from the March 2022 level,” said Aditi Nayar, chief economist at ICRA.
The government is due to sell bonds later in the day in a holiday-shortened week, putting further pressure on yields. Traders, however, expect the 10-year paper to hold in the 7.20% to 7.30% range during the day.

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