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10-Year Bond Price Falls After Perplexing Inflation Data


After the release of the retail inflation data on Monday, the yield on 10-year government bonds rose by 4 basis points as traders turn cautious. It jumped to 7.26 percent on Tuesday morning from 7.22 percent at its close on Monday. The bond prices will accordingly fall as prices and yields move in opposite directions.

10-Year Bond Price Falls After Perplexing Inflation Data

The Indian rupee opened higher on Tuesday morning at 70.75 per dollar which is slightly higher from its previous close of 70.93. The domestic currency was later seen losing ground at 70.94 against the dollar.

On Monday, the Central Statistics Office (CSO) showed that the consumer price index (CPI) based inflation had fallen to an 18-month low of 2.19 percent for the month of December as against 2.33 percent in November due to sliding food prices. Core CPI inflation, however, rose to 5.73 percent in the same month due to a significant jump in the education and health sector.

Traders are perplexed by the data as despite a sharp increase in expenses in the health, education and household goods sectors, the headline CPI, as well as rural demand, dropped. Until the reason for the fall is clear, traders may remain cautious.

Meanwhile, the rupee has fallen 1.4 percent so far in 2019 with foreign investors having sold $326.90 million in equity and $48.10 million in debt markets.

Read more about: bond inflation
Story first published: Tuesday, January 15, 2019, 10:33 [IST]
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