MUMBAI: Indian government bond yields are expected to decline in early deals on Tuesday after the central bank doubled the quantum of its scheduled debt purchase for the week.
The benchmark 10-year yield is likely to move between 6.65% and 6.68%, a trader with a private bank said, compared with the previous close of 6.7128%.
“We should see a gap-down opening in the 10-year benchmark bond yield today. This is a positive surprise, and it shows that the new central bank management is very pro-active in terms of market management,” the trader said.
The Reserve Bank of India said after market hours on Monday that it would double the quantum of security purchases under its next tranche of open market operation on February 13 to manage the liquidity deficit in the banking system.
The RBI will purchase government securities worth 400 billion rupees ($4.57 billion), against 200 billion rupees announced earlier, without altering the securities that it has chosen to buy.
The central bank is scheduled to buy bonds worth another 200 billion rupees on February 20.
Indian bond yields inch lower; 10-year yield 15 bps above central bank policy rate
The announcement came a day after the RBI cut its key interest rate by 25 basis points, but the reduction was not accompanied by any liquidity-infusing measure, which had disappointed market participants.
The RBI has bought bonds worth 200.20 billion rupees through OMO, infused 500 billion rupees through a 56-day variable rate repo, around 440 billion rupees through a dollar/rupee swap.
In January, the RBI also bought bonds worth 388.15 billion rupees through the secondary market, taking its overall infusion in the system to more than 1.50 trillion rupees.
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