* 10-year bond yield ends 1 bp lower at 7.82 pct
* 1-yr swap rate hits 2-yr low, 5-yr at 6-mth low on rate
* Sell-off in commodities seen helping ease CAD concerns
By Archana Narayanan
MUMBAI, April 16 (Reuters) - India's 10-year bond yields
fell on Tuesday but came off their near two-month lows hit
earlier as traders cashed in profits after the recent rally on
easing global commodity prices fuelled hopes the central bank
would cut interest rates next month.
The current sell-off in commodities, with brent crude
sinking below $100 a barrel for the first time in nine months
and gold plunging to a more than two-year low, is seen helping
ease India's current account deficit (CAD) concerns.
The current account deficit is a key variable in the central
bank's monitoring menu.
The recent spate of data showing easing wholesale and retail
inflation, and industrial output barely growing has raised hopes
the central bank is more likely to cut the benchmark repo rate
from 7.5 percent at its next policy review on May 3.
The Reserve Bank of India has cut interest rates in the last
two successive policy reviews by 25 basis points each, but had
signalled a limited room for further easing.
"The fall in gold and brent will help India in CAD
reduction, fiscal deficit reduction, and bringing down the
inflation expectations," said Sandeep Bagla, executive vice
president with ICICI Securities Primary Dealership.
"Bonds are a slave to inflation and in absence of high
inflation, yields have to come down in the medium run," said
Bagla, adding he expects the yield to come down to 7.70 percent
in the near term.
Bagla expects a 25 to 50 basis point rate cut in the May
The 10-year bond yield ended 1 basis point
down at 7.82 percent. The yield had slid to a low of 7.80
percent earlier in the session, a level last seen on Feb. 28.
The current account deficit hit an all-time high of 6.7
percent of gross domestic product in the December quarter on
heavy oil and gold imports and muted exports, increasing India's
reliance on volatile capital inflows to fund the shortfall.
Core wholesale price inflation, which strips volatile
indexes such as food and fuel prices, eased to around 3.5
percent from 3.8 percent in February, analysts said.
The one-year overnight interest swap ended
at 7.31 percent, 2 basis points lower than the previous close of
7.33 percent. It had fallen to 7.29 percent during the day, its
lowest since March 17, 2011.
The benchmark five-year swap rate ended at
7.06 percent compared with 7.11 percent on Monday. It had
dropped to 7.03 percent earlier in the day, its lowest since
Oct. 30, 2012.
(Editing by Subhranshu Sahu)