MUMBAI: Indian government bond yields were largely unchanged in early trading on Friday, with market participants awaiting the Reserve Bank of India’s monetary policy decision and its guidance.
The benchmark 10-year yield was at 6.6520% as of 9:30 a.m. IST, compared with its previous close of 6.6562%. The decision is due at 10:00 a.m. IST.
The RBI is widely expected to cut interest rates for the first time in nearly five years in Governor Sanjay Malhotra’s first monetary policy review. A majority of economists and market participants expect a 25-basis-point cut.
DBS said it expects the central bank to cut repo rate by 25 bps, with inflation expected to slow down going into the next financial year.
“Secondly, with the fiscal policy assuming a contractionary impulse on the back of a narrower deficit target for FY26, the monetary policy is likely to assume a growth supportive stance.
Lastly, high frequency indicators point to a slowdown in the growth momentum,“ senior DBS economist Radhika Rao said.
Hopes for a rate cut have jumped since the RBI announced infusion of around 1.50 trillion rupees ($17.15 billion) into the banking system, which includes open market bond purchases, fx swap and a 56-day variable rate repo, that will be conducted later in the day.
Indian bond yields to continue flattish trend as traders await RBI decision
Apart from this, the RBI also bought bonds worth around 310 billion rupees from the secondary market in January. Most market participants expect the RBI to continue buying bonds not in the next financial year as well.
As a result, bonds are seeing increased buying interest from foreign investors.
The central bank will also sell bonds worth up to 220 billion rupees later in the day.
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