India bonds dip as US Treasury rout counters RBI support hopes

MUMBAI: Indian government bonds dipped slightly early Monday as a selloff in US treasuries outweighed optimism over potential support from the Reserve Bank of India.

The yield on the benchmark 10-year note was at 6.5236% as of 10:10 a.m. IST.

It had settled at 6.5142% on Friday.

Bond yields move inversely to prices.

The 10-year US treasury yield rose 4 basis points to 4.1336% in Asian hours on debt supply concerns.

Back home, market participants are seeking clarity on whether the RBI’s suspected secondary market bond purchases are intended as a yield signal or merely reflect replacement demand.

Investors from the “others” category, which includes the RBI, insurers, pension funds and corporates, net bought bonds worth 205 billion rupees ($2.31 billion) last week, the segment’s biggest weekly purchase in nearly five years, per clearing house data.

The RBI may have ramped up purchases last week as it held around 200 billion-250 billion rupees of 5.15% 2025 government security that matured on Friday, traders said.

“The RBI’s buying briefly lifted demand, but the market will face a supply glut again if it halts purchases this week,” a trader at a private bank said.

At a meeting with the central bank last week, traders had urged the RBI to buy government debt and tweak the auction rules to ease pressure on the bond market, Reuters reported. Traders are also waiting for October retail inflation data due on Wednesday.

It is expected to have slowed more than a full percentage point to 0.48% from 1.54% in September, per a Reuters poll, its lowest in the current 2012-base series.