MUMBAI: Indian government bond yields opened lower on Monday on value buying and as favourable demand-supply dynamics received a boost after lower-than-expected supply from states this week.
The benchmark 10-year bond yield was at 6.8103% as of 10:00 a.m. IST, on Monday, compared with its previous close of 6.8193%.
“Bonds have recovered because investors are entering afresh, as any level above 6.80% is seen as a value-buying proposition, especially from state-run banks,” trader with a state-run bank said.
Bond yields jumped in the closing hours of Friday after the Reserve Bank of India Governor Shaktikanta Das said it would be “very premature” and risky to lower interest rates at this stage.
While inflation is expected to moderate going forward, the central bank would only think of rate cuts when it has confidence that inflation is durably aligned to its medium-term target.
State-run banks bought over 1 billion rupees of bonds on a net basis on Friday, and a majority of this was done after the comments, traders added.
The central bank had changed its monetary policy stance to “neutral” earlier this month.
India bond yields steady ahead of $4bn state debt sale
The minutes of its latest meeting will be released after Indian market hours on Wednesday.
Meanwhile, Indian states aim to raise 81 billion rupees ($963.68 million) through sale of bonds on Tuesday.
The quantum is the lowest in more than three months, and sharply lower than the 296 billion rupees as per earlier schedule.
The RBI did not sell bonds in two of the three weeks until Oct. 11, and traders are betting that they are unlikely to sell further for now.
The 10-year US Treasury yield stayed close to 4.10%, as investors continued to price in a less dovish Federal Reserve. Interest rate futures indicate a rate cut of 25 basis points by the Fed in November, with a 94% probability.
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