Last week, it was noticed that the bonds continued to fall as expected with the help of index of industrial production (IIP) data and inflation data. The market is divided into 25 basis points. It either includes rate hike and no rate hike. Last week, Benchmark 10-year bond yields were closed at 8.27%, decreased by 8 bps week on week.

IIP growth reading for May 2011 was 5.6% yearly. IIP decreased 3.1% on a month-on-month basis, following April’s month-on-month decrease of 1.6% whereas the manufacturing growth for May has lowered by 4.2% on a month-on-month basis.

Inflation, which was measured by wholesale price index (WPI) for June was recorded to be around 9.44% against market expectations of 9.68%. However, the non-food manufacturing index has increased by 0.2% month on month against 0.8% for the overall index and hence the July inflation number is likely to increase. The weak IIP growth numbers indicates the further weakness in non-food manufacturing data.

The government has auctioned 12,000 crore of bonds. These bonds were auctioned as 7.83% 2018 bond for 3,000 crore, 7.80% 2021 bond for 6,000 crore and the 8.30% 2040 bond for 3,000 crore. The cut offs that were recorded were 8.28%, 8.25%, and 8.59%, respectively.