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MUMBAI: Indian government bond yields were largely unchanged early on Monday as traders continued to book profit. The 10-year benchmark 7.26% 2032 bond yield was at 7.2076% as of 10:00 a.m. IST, after closing at 7.2120% on Thursday.

Indian markets were shut on Friday. There was heavy profit booking from state-run banks on policy day, and, hence, yields are unable to fall further, a trader with a primary dealership said. “The uptick in US yields is also acting as a resistance point.”

The 10-year US yield was at 3.37% on Monday. Bond yields plunged on Thursday after the Reserve Bank of India’s surprise move to maintain the status quo on the repo rate at 6.50%, following six consecutive hikes, saying it was closely monitoring the impact of recent global financial turbulence on the economy.

State-run banks sold bonds worth over 107 billion rupees ($1.31 billion) on a net basis on Thursday, their biggest single-session sales in three years.

Most market participants now expect a prolonged pause, even though RBI Governor Shaktikanta said the central bank was ready to act against inflation if conditions warranted, and the decision was “a pause and not a pivot”. Nomura said the policy pause will give way to a policy pivot toward rate cuts.

“We expect 75 bps in cumulative rate cuts in H2 FY24 (October 2023 – March 2024), which will lower the repo rate to 5.75% by March 2024.

At the margin, risks are skewed towards an earlier easing, rather than later.“

India bond yields crash as RBI keeps rates unchanged

Meanwhile, US data showed the economy maintained a strong pace of hiring in March, as non-farm payrolls increased by 236,000 jobs last month, while data for February was revised higher to show 326,000 jobs were added instead of 311,000 as previously reported.

This has raised the odds of a rate hike by the US Federal Reserve in May to over 70%.

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