India bonds a tad up ahead of RBI debt buy, policy decision this week

MUMBAI: Indian government bonds moved marginally higher on Wednesday after a quiet opening, ahead of the central bank’s debt purchase and policy decision scheduled for the next two days.

The benchmark 10-year 6.48% 2035 bond yield was at 6.7152% as of 10:45 a.m. IST.

It ended 5 basis points lower at 6.7245% on Tuesday, after climbing 7 bps to 6.7662% on Monday. Bond yields move inversely to prices. Bonds tracked other Indian assets higher on Tuesday after the US said it would slash tariffs on Indian goods to 18% from 50%, the highest in Asia.

“The trade deal move is done and dusted for bonds, with investors now eyeing the central bank’s open market operation and the policy outcome on Friday,” a trader with a primary dealership said.

The Reserve Bank of India will buy bonds worth 500 billion rupees ($5.54 billion) on Thursday, including the liquid former benchmark 6.33% 2035 paper, whose purchase would act as a cue for the central bank’s comfort with yields.

This will be followed by the RBI’s monetary policy decision, and even though a rate action is largely ruled out, investors will be monitoring the central bank’s guidance on liquidity management and scope for further bond buying.