MUMBAI: Indian government bond yields are expected to continue with their sideway moves on Wednesday, as market participants remain fully focused on the Reserve Bank of India’s monetary policy decision on Friday.
The 10-year bond yield is likely to move between 6.65% and 6.69%, a trader with a private bank said, compared with Tuesday’s close of 6.6732%.
“Market has been taken over by bulls and barring some profit-taking, there is not much selling interest, so we could see a further nudge downwards to bond yields,” the trader said.
The central bank is widely expected to cut interest rates for the first time in nearly five years in Governor Sanjay Malhotra’s first monetary policy review, aiming to boost economic growth which is seen falling to a four-year low.
A majority of economists and market participants are expecting a 25-basis-point cut from the RBI.
The RBI has also proactively started infusing liquidity in the banking system, which was an ask by market participants. In the secondary market, the RBI has bought bonds worth 310 billion rupees ($3.56 billion) in two weeks to Jan. 24, while buying bonds through an open market operation last week.
Of the total purchases, one-fourth comprised of the benchmark paper.
The central bank infused around 440 billion rupees through a $5.1 billion forex swap last week, and will conduct 56-day repo on Feb. 7.
The RBI has also announced more OMO purchases of 200 billion rupees each on Feb. 13, and Feb. 20.
India bond yields seen a tad down on bets of rate cut
Ashhish Vaidya, managing director and treasurer - global financial markets, DBS Bank India, has said the RBI would likely buy bonds worth 2 trillion rupees in the next financial year and the slight rise in gross borrowing is immaterial.
India is targeting a gross borrowing of 14.82 trillion rupees in the next financial year, up from 14.01 trillion rupees.
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