Indian bonds slump as wholesale inflation touches 23-month high

The Indian government bonds slumped Thursday after data showed that the wholesale inflation for July jumped to 23-month high, indicating that the Reserve Bank of India (RBI) would not ease its key policy rate immediately.

The yield on the benchmark 10-year bonds, which moves inversely to its price, rose 1 basis point to 7.117 percent, the yield on super-long 30-year bond also jumped 3 basis points to 7.278 percent and the 5-year note yield climbed 1-1/2 basis points to 7.046 percent by 09:00 GMT.

India’s wholesale price index (WPI) increased to 3.55 percent in July driven by costlier vegetables, pulses and sugar prices. The market was expecting a 2.55 percent, as compared to the 1.62 percent seen in June. This has raised concerns that the Reserve Bank of India (RBI) may not be able to slash rates at the upcoming policy meeting.

According to Reuters, India's federal government will auction 150 billion rupees of bonds tomorrow. The bond market was shut on Aug. 15 for Independence day and yesterday for a local holiday.

Markets await the announcement of the new RBI chief, which is anticipated to happen in the ongoing monsoon session of the Parliament.

Meanwhile, the Sensex rose 0.45 percent or 127.05 points to 28,132 and Nifty-50 futures traded 0.60 percent higher or 52.05 points at 8,684 by 09:00 GMT.