MUMBAI: Indian government bond yields dipped after a marginal uptick in early trading on Monday, as optimism over the central bank’s bond purchases and expectations of a rate cut overshadowed the government’s higher-than-expected gross borrowing.
The benchmark 10-year yield was at 6.6835% as of 10:00 a.m. IST, compared with its previous close of 6.7001%. Earlier in the day, the yield had risen to 6.7100%.
“The rise was very marginal, as market is positive due to actions of the central bank, and we are heading into a rate cut this week, so any major selloff at this point makes little sense,” trader with a state-run bank said.
The Reserve Bank of India more than doubled its purchases of bonds in the secondary market, with net buying of 208.50 billion rupees ($2.39 billion) in the week ending Jan. 24, after purchases of 101.75 billion rupees in the prior week.
India bond yields seen little changed with focus on central bank debt buy
The RBI also bought bonds worth 200 billion rupees through an open market auction as part of its mega liquidity infusion package, and the benchmark bond accounted for one-fourth of that purchase.
It also conducted $5 billion swap last week, will undertake a 56-day variable rate repo on Feb. 7 and buy bonds worth an additional 400 billion rupees this month.
The RBI will announce its policy decision on Feb. 7, with economists expecting a 25 basis point rate cut.
Meanwhile, New Delhi will target a narrower fiscal deficit of 4.4% of gross domestic product for fiscal year 2025-26, down from a revised 4.8% for the current year, but increased gross borrowing to 14.82 trillion rupees from 14.01 trillion rupees.
Economists in a Reuters poll had pegged gross borrowing at 14.28 trillion rupees.
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