MUMBAI: Indian government bond yields are expected to move sideways in early deals on Friday, as traders await fresh debt supply via a weekly auction, while underlying sentiment remains positive after a dovish central bank monetary policy.
The benchmark 10-year bond yield is likely to move between 6.42% and 6.46% until the auction, a trader at a private bank said, compared with Wednesday’s close of 6.4432%, which was the lowest since December 20, 2021.
India’s financial markets were closed on Thursday.
New Delhi will sell bonds worth 320 billion rupees ($3.7 billion) later in the day, which include the liquid 15-year paper and a new 40-year bond.
“Though the policy decision was dovish, we should see some consolidation around current levels before moving downwards as there could be a lot of profit booking,” the trader said.
The Reserve Bank of India lowered its key repo rate for a second consecutive time, as expected, and changed its monetary policy stance to “accommodative” from “neutral”, signalling room for more cuts ahead as it seeks to boost the sluggish economy in the face of US tariffs.
Most market participants are expecting the central bank will again cut the repo rate by 25 basis points in June.
RBI Governor Sanjay Malhotra said the central bank is looking at maintaining the liquidity surplus at around 1% of deposits, to ensure policy transmission.
India bond yields seen flattish as traders eye RBI decision for cues
The RBI has infused over 5.41 trillion rupees into the banking system since the start of 2025 through debt purchases and foreign exchange swaps and will buy bonds worth another 400 billion rupees in April.
“Overall, this policy is more dovish than previous ones, acknowledging growth concerns due to global turmoil and showing comfort with the inflation trajectory,” said Vikas Garg, head of fixed income at Invesco Mutual Fund.
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