India corp bonds steady, federal borrowing eyed

MUMBAI, Feb 9 - Indian corporate bond yields were steady on Tuesday, as traders eyed the government's borrowing plan for 2010/11 and sentiment was subdued on expectation robust industrial growth adds to the case for a rise in interest rates.

The yield on the Reuters benchmark five-year corporate bond <AAAIN5Y=> was at 8.44 percent, little changed from Monday's 8.43 percent.

The spread between the five-year corporate and government bonds was also little changed at 96.35 basis points, from 96.65 on Monday.

Concerns persist about next year's federal borrowing especially amid fiscal pressures, ahead of the government's budget presentation on Feb 26.

On Monday, the government forecast the economy would grow 7.2 percent in the 2009/10 fiscal year ending on March 31, picking up from 6.7 percent the previous year.

Data on Friday is expected to show industrial output rose 12 percent in December from a year earlier, close to growth of 11.7 percent in November, a Reuters survey showed. [ID:nSGE6180FM]

At a policy review last month, the central bank increased banks' reserve requirements but held key interest rates steady. [ID:nSGE60S0GY]

While stronger growth may lead to interest rate rises, it could also mean lower-than-expected government borrowing needs because of higher tax receipts and lower welfare spending.

The yield on the benchmark Indian 10-year bond <IN10YT=RR> ended at 7.70 percent, after rising to 7.72 percent, its highest since Jan. 15. It had ended on Monday at 7.68 percent.

Export-Import Bank of India's 6.05 percent bonds maturing in 2013 were the most traded, with a volume of 3 billion rupees.

Total volume traded on Monday was 19.07 billion rupees, Thomson Reuters data showed.

This data is sourced from the Bombay Stock Exchange, National Stock Exchange and Fixed Income Money Market and Derivatives Association of India .