MUMBAI: Indian government bond yields were flat on Friday as traders waited for the Reserve Bank of India’s (RBI) commentary and outlook on liquidity as well as inflation at the upcoming monetary policy decision, with no tweak in rates expected and stance already priced in.
The 10-year benchmark bond yield was at 7.2375% as of 9.45 a.m. IST, after ending the previous session at 7.2528%.
“Inflation and liquidity are the key themes to watch out for today’s meeting, as status quo on rates and stance seems to be a done deal,” trader with a private bank said.
The central bank will hold the key policy rate at 6.50% for a fifth consecutive meeting, according to a Reuters poll, and inflation control is expected to retain prominence amid expectations of a spike in food prices in coming months.
Traders would also remain focused on the response from the central bank on its announced of open market sale of bonds via auctions.
In October, the RBI had announced its intention to sell bonds via auctions, that had led to a sharp spike in yields.
Indian bond yields seen slightly lower tracking US peers, oil
A jump in near-month inflation readings would also be in focus as India’s retail inflation likely picked up in November due to higher food prices, bringing it closer to the upper end of the RBI’s 2%-6% target range, a Reuters poll found.
Meanwhile, oil prices as well as US Treasury yields continue to remain on the lower side, removing any major worries on the global front.
The benchmark Brent crude contract was around $75 per barrel, while the 10-year US yield was around 4.17%, with odds for a rate cut in March around 65%.
Traders also eye fresh supply with New Delhi set to raise 390 billion Indian rupees ($4.68 billion) via sale of bonds, which includes 50 billion rupees of 10-year green bonds.
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