MUMBAI: Indian government bond yields ended lower for a third consecutive session on Wednesday, with the benchmark bond yield closing at its lowest in five weeks, as sharp gains in the local currency helped sentiment.
The market’s mood was also lifted by a report that said government spending could be less than budgeted, two sources told Reuters.
The benchmark 10-year yield ended at 7.3870%, after closing at 7.4342% on Monday. The yield has fallen five basis points in the last two sessions. “I do not expect any material increase in the size of government borrowings.
I think we should continue to see some level of fiscal consolidation, though not at a very rapid pace.
I’m expecting some kind of fiscal consolidation glidepath,“ said Neeraj Gambhir, group executive and head - treasury, markets, and wholesale banking products at Axis Bank. “The next major trigger would be the December Monetary Policy Committee meeting. Rate action and guidance will be the main events.”
The Indian rupee gained for a third straight session against the US currency.
It ended at 81.4350, its highest since Sept. 30. Government spending this year could be less than budgeted for the first time in three years, two sources with direct knowledge of the matter said, amid a push to meet a fiscal deficit target of 6.4% of gross domestic product.
Gambhir also added the bond yield curve could invert, with the 10-year bond yield easing below those of shorter tenor securities, as the central bank’s rate hike cycle nears its end.
Indian bond yields dip on value-buying; firmer rupee aids mood
“However, till the time we are in a hiking cycle, the flatness will persist.”
The benchmark Brent crude contract was 0.4% lower at $95 per barrel, after having eased over 3% in the last two sessions on worries about demand due to potential new lockdowns in China.
India benefits from declining oil prices as it tamps down the country’s inflation, which has persistently been above the central bank’s target range.
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