India’s benchmark 10-year bond yield ended at 7.16%, up 8 basis points on the day. It had dropped to a low of 7.04% earlier this week, its lowest level since the Reserve Bank of India shifted its focus to inflation control at its April 8 policy review.
It is also the 10-year bond yield’s biggest single-session climb since April 8.
“The market is volatile. One day there is a risk-off trade and the very next day there is risk-on. Indian markets are likely to closely track what happens globally until the Fed meeting next week,” a senior trader at a private bank said.
US treasury yields rose at the long end on Wednesday after the prior day’s rally as investors awaited greater clarity on the “restrictive” policy the Federal Reserve plans to pursue next week to combat inflation by curbing economic growth.
The Reserve Bank of India on its part is seen raising its repo rate in June and hiking at a faster pace than predicted just a few weeks ago as a surge in inflation is likely to put pressure on it to act quicker, a Reuters poll showed earlier this week.
The rupee closed trade at 76.48 per dollar compared to its close of 76.5325, tracking gains in the domestic share market and on expectations of dollar inflows towards the country’s largest initial public offering.
Indian shares rose and stocks across the board rallied as risk appetite improved globally on the back of upbeat technology earnings in the United States.
The country expects to raise up to $2.74 billion from selling a 3.5% stake in Life Insurance Corp’s (LIC) IPO, according to a prospectus filed late on Tuesday, just a third of its original hopes.
“We may see rupee testing 77 levels once, after which we could see some opportunistic (dollar) selling happening to bring it once again to the positive territory,” said Heena Naik, research analyst for currency at broking firm Angel One Ltd.
“Not forgetting, the upcoming IPO-related inflows that could give a further boost to the currency,” she added.