MUMBAI: Indian government bond yields are expected to inch up on Thursday, as market participants await debt supply later in the day as well as on Friday.
The sentiment was also negative after the Reserve Bank of India (RBI) maintained a hawkish stance on Wednesday and surprised the market by leaving the door open to more tightening, saying core inflation remained high.
The benchmark 10-year yield could move in the 7.33%-7.38% range, a trader with a private bank said, after closing at 7.3435% on Wednesday.
The mood in the market is bearish after the central bank’s hawkish monetary policy tone, and a constant supply will be of little help, the trader said.
India will raise 80 billion rupees ($968.55 million) through the sale of five-year and 10-year green bonds.
Indian bond yields seen little changed before RBI policy decision, guidance key
This would be followed by a debt auction of 300 billion rupees on Friday, including the liquid 14-year bond. Even as the government auction cycle comes to an end, New Delhi’s gross supply for the next financial year stays elevated at 15.43 trillion rupees.
The RBI’s Monetary Policy Committee (MPC) raised the repo rate for the sixth consecutive time by 25 basis points to 6.50% which was expected, but said the policy stance would remain focused on the withdrawal of accommodation, with four of the six MPC members voting in its favour.
Most analysts had expected this hike to be the final one in the RBI’s current tightening cycle, with some hoping the stance to change to neutral.
“The April monetary policy statement of RBI thus assumes special importance of whether we can signal an exit from coordinated monetary policy increases, as otherwise, it could become a self-fulfilling prophecy of central banks of emerging markets doing a continuous catch-up with the Fed,” State Bank of India’s economic research wing said.
Comments
Comments are closed for this article.