MUMBAI: Indian government bond yields ended higher on Tuesday, as traders booked profit a day after the benchmark yield fell to its lowest in a year on bullish sentiment, which capped a further decline in yields.
The 10-year benchmark 7.26% 2033 bond yield ended at 7.1298%, after closing at 7.0977%, the lowest level since April 27, 2022, in the previous session.
“There has been strong buying appetite since the last few sessions, leading to a fall in yields. The fall was, however, capped today as profit-booking took place,” said a trader with a private bank.
India bond yields seen little changed before RBI minutes
Strong demand, mainly from foreign banks, has aided yields as they bought bonds worth 135 billion rupees ($1.65 billion) on a net basis in the last five sessions, data from Clearing Corp of India showed.
Most market participants expect the benchmark yield to find support at the 7.05% level after breaking below the key 7.10% mark.
Bond yields have fallen over 10 basis points since Friday, supported by growing bets of global and domestic monetary policy pivots.
The Reserve Bank of India (RBI) maintained the status quo on its policy rate earlier this month and easing inflation has cemented bets of a prolonged pause despite policymakers’ hawkish tilt revealed in the minutes of their meeting.
“We expect a long pause from the RBI from hereon,” said Mahesh Patil, chief investment officer at Aditya Birla Sun Life Asset Management Co.
“While the Federal Reserve is expected to hike once more, Indian inflation and growth trajectory has been quite different from the U.S., and RBI has repeatedly tried to highlight that they formulate policies based on domestic factors.”
Market participants now await the Fed’s monetary policy decision next week. The odds of a 25 basis point rate are currently at 88%, while the rest expect status quo.
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