Bond yields tread water on Wednesday

The yields on 10-year 8.79% - 2021 were trading flat at its previous close of 8.18%

Bond yields were treaded water ahead of the release of October’s IIP, key data point ahead of RBI's monetary policy meeting on December 18. The expectation is that Index of Industrial Production (IIP) for the month of October likely expanded at 5% versus a contraction of 0.4% in September. Further, investor’s were eyeing November’s CPI numbers.

However, November wholesale price index data, which the Reserve Bank of India gives more weight to, in setting policy than the relatively new consumer price index, is due for release on Friday.

On the global front, benchmark US Treasuries firmed slightly in Asian trade on Wednesday, underpinned by expectations that the US Federal Reserve will announce more easing steps at the conclusion of its policy meeting later in the session. Meanwhile, Brent crude held above $108 a barrel on Wednesday as OPEC pumped less oil last month, although rising output from the United States and uncertainty about its budget for next year capped gains.

Closer home, the Reserve Bank of India has announced the auction of 91-day and 364-day Government of India Treasury Bills for notified amount of Rs 5,000 crore each. The auction will be conducted on December 12, 2012 using 'Multiple Price Auction' method.

The yields on 10-year 8.79% - 2021 were trading flat at its previous close of 8.18%.

The benchmark five-year interest rates were trading 1 basis point higher at 7.09% from its previous close of 7.08%

Meanwhile, India’s index of industrial production (IIP), a key measure of industrial output, expanded at its fastest pace in 16 months at 8.2% in October versus a contraction of 0.4% in September. This is the highest growth that the IIP has touched since June 2011, when the indicator came in at 9.5%.

Additionally, according to the data released by Central Statistics Office, Ministry of Statistics and Programme Implementation, provisional annual inflation rate based on all India general CPI (Combined) for November 2012 on point to point basis stood at 9.90 percent as compared to 9.75 percent for the previous month of October 2012.