By Neha Dasgupta
MUMBAI, Oct 10 (Reuters) - Indian government bonds gained
for a third straight day after Reuters reported the Indian
government was in talks with JP Morgan and others to be included
in the global bond indexes, citing sources familiar with the
Inclusion in popular government bond indexes could attract
$20 billion-$40 billion in additional flows into India over a
year, Standard Chartered Bank wrote in a report last month.
'News about India's inclusion in global bond indices is
going to be positive for bonds and I think this was expected,
and was likely to happen sooner than later' said Nirav Dalal,
president and managing director, debt-capital markets, YES Bank
'I think the bond markets have also got the sense that RBI
is most likely to unwind the remaining MSF (Marginal Standing
Facility) measure either before 29th or on the policy day,'
Dalal said, adding that the market has not necessarily priced
out a 25-basis-points rate hike and that leaves room for bond
yields to tread lower.
The RBI will review its monetary policy on Oct. 29. Earlier
this week, the central bank cut the MSF rate by 50 basis points,
further unwinding the extraordinary measures taken to defend the
rupee as pressure on the embattled currency eased.
The market now expects clarity to emerge after key economic
data prints on factory output on Friday and inflation data next
A Reuters poll projects inflation based on wholesale prices likely rose 6 percent in September, slightly below a
six-month high of 6.1 percent in August. Consumer prices likely rose 9.60 percent from August's 9.52
The benchmark 10-year bond yield fell 4 bps
to 8.42 percent.
Foreign institutional investors continued to sell,
offloading more than $1 billion in October, which traders said
was an indication of the ongoing uncertainty in markets over the
outcome of the U.S. debt ceiling negotiations.
The one-year overnight indexed swap rate was
unchanged at 8.37 percent, while the five-year rate closed down 1 bp at 8.10 percent.
(Editing by Sunil Nair)
Keywords: MARKETS INDIA BONDS/
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