MUMBAI: Indian government bond yields fell on Thursday amid value buying and a dip in U.S. peers, while traders awaited a bond buyback and domestic inflation due later in the day.
The yield on the benchmark 10-year bond was at 6.3014% as of 10:00 a.m. IST, compared with its previous close of 6.3069%.
“While we started positively, any rally in prices is difficult to sustain due to the current market environment,” a trader with a state-run bank said.
Bond yields rose since Friday after the Reserve Bank of India’s (RBI) shift in stance to “neutral” disappointed investors as it signalled limited scope for further rate cuts.
The central bank, which cut rates by an outsized 50 basis points (bps), is likely to pause rates for the rest of this fiscal year, per a Reuters poll of economists.
All eyes will be now on India’s consumer inflation data, which likely eased to a more than six-year low of 3%, thanks to a favourable base and a further moderation in food prices, according to a Reuters poll.
India bond yields extend rise as market digests RBI stance shift
The RBI expects inflation to average 3.7% this financial year, down from its earlier expectation of 4%.
Meanwhile, India plans to buy back bonds worth 260 billion rupees ($3.04 billion) later in the day. They mature next fiscal year.
Rates
Indian overnight index swap (OIS) rates are expected to see paying pressure across the curve as sentiment remains weak, with the market still digesting the fact that there may not be more rate cuts for the foreseeable future.
The one-year OIS rate was 2 bps higher at 5.58%, while the two-year OIS rate and the liquid five-year OIS rate were little changed at 5.53% and 5.75%, respectively.
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