Bonds edge higher post weekly food Inflation climbs to a 4 week high at 8.55%

Pre Weekly Inflation Data:

Bond yields edged higher taking cues from a rise in global oil prices and higher U.S. yields. The bond yields also edged higher since the traders preferred being on the sidelines ahead of the weekly food and fuel Inflation data, which is due to be announced later in the noon.

As on the global front, longer-dated U.S. treasury debt prices dipped on Wednesday as strength in stocks eroded some of the safe-haven appeal of government debt, although yields remained very near to six month low-levels. Meanwhile, Brent crude futures rose above $115 a barrel on Thursday, supported by a weaker dollar and an unexpected drop in U.S. distillate stocks that overshadowed gains in gasoline and crude inventories last week.

Back home, the yields on 10-year benchmark; the 7.80%-2021 was at 8.39% higher from its previous close of 8.37% on Wednesday.

The benchmark five-year interest rate swaps were at 8.13% higher against the Wednesday's close of 8.07%.

The Government of India have announced the sale (re-issue) of three dated securities for Rs 12,000 crore on May 27, 2011, which include (i) “7.83 percent Government Stock 2018” for a notified amount of Rs 4,000 crore (nominal), (ii) “7.80 percent Government Stock 2021” for a notified amount of Rs 5,000 crore (nominal), and (iii) “8.30 percent Government Stock 2040” for a notified amount of Rs 3,000 crore (nominal) through price based auctions. The auctions will be conducted using uniform price method.

Post Weekly Inflation Data:

Food inflation surged to the highest level in four weeks at 8.55% on annual basis during week-ended May 14, picking up pace from an annual rise of 7.47% recorded in the previous week. Food inflation was at 21.55% in the year-ago period. Meanwhile, the food prices index jumped by 0.6% to 186.7 from 185.5 during the previous week. The broader ‘primary articles’ index, which has a weight of 20.12% in the overall wholesale price index (WPI) registered an increase of 0.04% to 192.4 from 191.7 seen in the previous week. The annual rate of inflation, calculated on point to point basis, for this group stood at 11.60% for the week ended May 14 as compared with 10.94% in the previous week.

The index for ‘fuel and power’ with a weight of 14.91% in overall WPI remained unchanged at its previous week’s level of 160.01%. The annual rate of inflation for this group, calculated on point to point basis, also remained unchanged at 12.11%.

The yields on 10-year benchmark; the 7.80%-2021 was at 8.40% higher from its previous close of 8.37% on Wednesday.

The benchmark five-year interest rate swaps were at 8.13% higher against the Wednesday's close of 8.07%.