MUMBAI: India's one-year overnight indexed swap(OIS) rate rose on Wednesday after higher-than-expected inflation for November rekindled worries price pressures may persist longer than anticipated.
At 1:58 p.m., the one-year rate was at 7.77 percent, up 5 basis points on the day, after touching 7.66 percent earlier in the session.
The benchmark five-year swap rate was at 7.02 percent, rising from a low of 6.93 percent hit earlier, and a tad higher than 7 percent at previous close.
"The inflation print has brought back the focus that we are not out of price pressure yet. The exuberance has completely gone off," a senior trader with a foreign bank, said.
India's wholesale prices rose more than expected in November, leaving inflation stubbornly high and suggesting the central bank would hold rates steady at its review on Friday even as worries grow over the health of the economy.
It rose 9.11 percent from a year earlier, slowing from a 9.73 percent rise in October but coming in above the 9.04 percent increase forecast in a Reuters poll.
Traders said a depreciating rupee is likely to offset gains from softening food prices and the impact is beginning to show on the headline inflation.
"The rate cut expectations that were building up are receding after today's data," the trader said.
India's central bank is widely expected to keep rates on hold at its review on Friday, but economists in a new Reuters poll expect it to accelerate monetary easing in 2012 as economic conditions worsen in Asia's third-largest economy.
Traders said the RBI might cut the cash reserve ratio, or the portion of deposits banks have to maintain with the central bank, or go in for more aggressive bond buybacks to ensure adequate liquidity in the banking system.
The RBI has bought back government debt worth 243.11 billion rupees over the past three weeks to help ease tight cash conditions.
Banks borrowed 865.45 billion rupees from the central bank's liquidity adjustment facility on Wednesday, higher than 797.30 billion rupees on Tuesday. Liquidity is expected to tighten further after the advance tax outflows on Dec. 15.
Volumes in the OIS market, as reported on the trading platform, were at 17.75 billion rupees, according to Clearing Corp of India data.
At 1:58 p.m., the one-year rate was at 7.77 percent, up 5 basis points on the day, after touching 7.66 percent earlier in the session.
The benchmark five-year swap rate was at 7.02 percent, rising from a low of 6.93 percent hit earlier, and a tad higher than 7 percent at previous close.
"The inflation print has brought back the focus that we are not out of price pressure yet. The exuberance has completely gone off," a senior trader with a foreign bank, said.
India's wholesale prices rose more than expected in November, leaving inflation stubbornly high and suggesting the central bank would hold rates steady at its review on Friday even as worries grow over the health of the economy.
It rose 9.11 percent from a year earlier, slowing from a 9.73 percent rise in October but coming in above the 9.04 percent increase forecast in a Reuters poll.
Traders said a depreciating rupee is likely to offset gains from softening food prices and the impact is beginning to show on the headline inflation.
"The rate cut expectations that were building up are receding after today's data," the trader said.
India's central bank is widely expected to keep rates on hold at its review on Friday, but economists in a new Reuters poll expect it to accelerate monetary easing in 2012 as economic conditions worsen in Asia's third-largest economy.
Traders said the RBI might cut the cash reserve ratio, or the portion of deposits banks have to maintain with the central bank, or go in for more aggressive bond buybacks to ensure adequate liquidity in the banking system.
The RBI has bought back government debt worth 243.11 billion rupees over the past three weeks to help ease tight cash conditions.
Banks borrowed 865.45 billion rupees from the central bank's liquidity adjustment facility on Wednesday, higher than 797.30 billion rupees on Tuesday. Liquidity is expected to tighten further after the advance tax outflows on Dec. 15.
Volumes in the OIS market, as reported on the trading platform, were at 17.75 billion rupees, according to Clearing Corp of India data.
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