MUMBAI: Indian government bond yields ended marginally lower for the first time in seven sessions on Monday as market participants waited for local retail inflation due post market hours, which will help them assess the central bank’s future path of rate hikes.
The benchmark 10-year yield ended at 7.2938%, against Friday’s closing of 7.2982%. It had gained an aggregate nine basis points in the last six sessions. Other bond yields eased by one basis point (bp) - two bps.
“There was an initial selloff after the central bank’s surprise bond sale, but market recovered as broad expectations supported further easing in inflation,” said Debendra Kumar Dash, senior vice president, treasury, AU Small Finance Bank.
India’s consumer price inflation likely cooled to a nine-month low of 6.40% in November, according to a Reuters poll of economists, helped by a moderation in food prices.
The October inflation reading stood at 6.77%. It has stayed above the RBI’s tolerance range of 2%-6% for 10 straight months, prompting the central bank to raise repo rate by 35 basis points to 6.25% last week, its fifth consecutive hike.
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Bond yields had risen earlier in the session, with the benchmark yield rising to its highest level in three weeks after the Reserve Bank of India (RBI) sold bonds for the first time in 11 weeks.
The RBI had sold bonds net of 28.90 billion rupees $350.04 million) in the week ended Dec. 2, its first such sale since week ended Sept. 16, and biggest since week ended Jan. 7.
Investor sentiment was cautious as the RBI raised repo rate by 35 basis points last week and highlighted inflation concerns, which raised investor fears of another rate hike in the next policy in February.
“The general consensus was a pause in 2023 after a rate hike in December but the RBI sounded hawkish on inflation, so now the data will give further cues,” a dealer at a state-run bank said.
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