MUMBAI: Indian government bond yields are seen inching higher in early deals on Monday, as investor sentiment remains subdued after the central bank did not introduce any liquidity-boosting measures along with its interest rate cut.
The benchmark 10-year yield is likely to move between 6.68% and 6.74%, a trader with a private bank said, compared with previous close of 6.7043%.
Investor appetite for the benchmark bond was also soured as the central bank did not include this note for its second open market bond auction due this week.
“There were a lot of expectations in terms of other liquidity measures from the monetary policy, but since those remain unfulfilled, we could see some more upward correction in yields today, but 6.75% should not be taken,” the trader said.
The Reserve Bank of India on Friday cut its key interest rate by 25 basis points as it seeks to boost the sluggish economy.
RBI Governor Sanjay Malhotra said the central bank will continue to monitor the evolving liquidity and financial market conditions and proactively take appropriate measures to ensure orderly liquidity conditions, but did not announce measures.
The RBI also announced details of its second open market purchase of bonds worth 200 billion rupees ($2.28 billion) under its mega liquidity infusion package, but did not include the benchmark paper.
In its first such auction, the RBI had bought bonds worth around 200 billion rupees, and one-fourth of that comprised of the benchmark bond.
Indian bond yields inch lower; 10-year yield 15 bps above central bank policy rate
The RBI has also infused 500 billion rupees through a 56-day variable rate repo, around 440 billion rupees through a dollar/rupee swap and will conduct 200-billion-rupee open market operation on February 20.
In January, the RBI also bought bonds worth 388.15 billion rupees through the secondary market, taking its overall infusion in the system to over 1.50 trillion rupees.
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