MUMBAI: Indian government bond yields inched up early on Tuesday, snapping a week-long drop, after the central bank’s tweak to liquidity management norms dampened demand for government securities.
The benchmark 10-year bond yield was at 6.3365% as of 10:15 a.m. IST, compared with its previous close of 6.3164%, its lowest level since November 9, 2021.
“There is some negative reaction in bonds, which was on expected lines, but 6.35% levels on the benchmark should hold and attract fresh buying,” trader with a state-run bank said.
The Reserve Bank of India released revised liquidity management guidelines after market hours on Monday, directing banks to set a buffer rate of 2.5% on digitally accessible retail deposits - half the level announced in July - to better manage risks in case of quick and heavy withdrawals.
A higher buffer rate was expected to generate more demand for government securities from lenders, which traders said would now take a hit.
The local benchmark’s upward trend also tracked gains in US treasuries, which surged as escalating attacks by the Trump administration on Federal Reserve Chair Jerome Powell worried investors.
The US 10-year yields rose 7 basis points to 4.403% in Asian hours.
India’s 10-year bond yield stays near over 3-year low ahead of RBI note purchase
However, investors expect the rise to be capped, betting that RBI’s bond purchase, upcoming policy minutes and growing expectations for rate cuts in the market will buoy sentiment.
The central bank is set to buy bonds worth 200 billion rupees ($2.35 billion) on Tuesday, its fourth such auction this month.
It has already bought bonds worth 800 billion rupees in April.
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