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US10Y<\/a> was at 4.0865%, inching slightly lower in Asian hours after climbing nearly 8 basis points, tracking a selloff in Japanese and European bonds.<\/p>\nMeanwhile, Indian states are set to raise 313.5 billion rupees ($3.50 billion) through the sale of 4-year to 30-year bonds later in the day, well above the previously scheduled 210 billion rupees.<\/p>\n
Market participants are on edge heading into a supply-heavy week, with sentiment already dented by fading rate cut expectations and a slumping rupee.<\/p>\n
“All eyes are on (the central bank’s) policy, but the rupee volatility isn’t helping,” said Kruti Chheta, fund manager and fixed income analyst at Mirae Asset Investment Managers (India).<\/p>\n
“If rupee volatility continues, then we will see the 10-year yield once again touching 6.60% levels.”<\/p>\n
India’s economy expanded at a sharper-than-expected clip of 8.2% in the July-September quarter, while retail inflation slowed to a record-low 0.25% in October. The divergence is raising doubts about the need for the Reserve Bank of India to lower rates, analysts said. <\/p>\n
Dimnishing hopes of a rate cut were also evident in India’s five-year overnight index swap (OIS) rate, a key gauge of long-term rate expectations, which climbed to a three-month high on Monday.<\/p>\n
RATES<\/p>\n
India’s overnight index swap (OIS) rates are expected to move higher on Tuesday, tracking higher U.S. Treasury yields.<\/p>\n
The one-year OIS (INR1YMIBROIS=CC) ended at 5.4850% on Monday, while the two-year swap (INR2YMIBROIS=CC) shut at 5.5075%. The five-year rate (INR5YMIBROIS=CC) settled at 5.8050%.<\/p>\n
KEY INDICATORS:<\/p>\n
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BRN1!<\/a> up 0.11% at $63.23 per barrel after easing 0.05% in the previous session<\/p>\n