MUMBAI, Sept 28 (Reuters) - Indian government bond
yields ended higher for the first time in three sessions on
Wednesday, as the 10-year U.S. Treasury yield hit 4% for the
first time since April 2010, highlighting investor nervousness
over high policy rates had intensified.
The benchmark Indian 10-year government bond yield
ended at 7.3340%, after closing at 7.2915%. The
yield had dipped 10 basis points in last two sessions.
Traders also await the Reserve Bank of India's monetary
policy decision on Friday, and details of the government's
borrowing plan for the rest of the fiscal, due in a few days.
"Rate action and guidance in monetary policy along with
developments over index inclusion will continue to drive the
markets," said Ritesh Bhusari, deputy general manager for
treasury at South Indian Bank.
U.S. rate hikes and the resultant pressure on the rupee is
likely to give the RBI reason to deliver a 50-basis-point rate
hike on Friday, as the slim majority of economists in a Reuters
poll predict, even as it tries to protect a recovery in growth.
The RBI has already raised rates by 140 basis points between
May and August to tackle inflation that has stayed above its
tolerance level for eight straight months through August.
The two-year U.S. Treasury yield, considered an
indicator of interest rate expectations, was close to its
highest level in 15 years. The 10-year Treasury yields
climbed as high at 4.0190% before easing.
Last week, the Federal Reserve hiked rates by 75 bps for the
third consecutive time. On Tuesday, Chicago Fed President
Charles Evans said the central bank will need to raise rates by
at least another percentage point this year, a more aggressive
stance than he had previously embraced.
Meanwhile, traders also await the Indian government's
borrowing calendar for October-March. Analysts expect the market
will easily absorb the borrowings for the rest of this fiscal
year, though at higher interest costs.
The government is scheduled to borrow a gross 5.86 trillion
Indian rupees ($71.55 billion) in the period, which could
increase by another 160 billion rupees after it failed to raise
the planned amount from the sale of floating rate securities
($1 = 81.9010 Indian rupees)
(Reporting by Dharamraj Lalit Dhutia; Editing by Savio D'Souza)