Bonds Record Best Week Since April

Indian bonds saw their best week since April last week, buoyed by strong buying from mutual funds and foreign inflows as INR strengthened. 10-Year yields dropped over 10bps last week, the biggest weekly drop since April. The move higher in bonds was extended after a strong auction on Friday, the RBI sold INR 260bn of bonds as planned with cut off yields lower than expected. Bonds are expected to continue to rise today, oil has extended losses in early trade after Saudi Arabia announced it will cut oil prices for sales to Asia next month by more than double the expected amount days after OPEC agreed to go ahead with production increases. Lower oil prices assuage inflation worries which in turn reassures markets that the RBI will refrain from tightening in the near term after investors were spooked by some hawkish leanings in the latest RBI minutes. Markets will look ahead to industrial production and CPI data on Friday.