MUMBAI: Indian government bond yields inched down at the start of the week after the central bank announced more liquidity infusion into the banking system, while US bond yields came off their recent highs.
The benchmark 10-year yield was at 6.6891% as of 10:00 a.m. IST on Monday, compared with its previous close of 6.7103%.
The Reserve Bank of India doubled the quantum of purchase of bonds for a second time in as many weeks and will buy debt worth 400 billion rupees ($4.61 billion) on Thursday. Open market operations boost banking system liquidity and increase demand for bonds.
The central bank also included the benchmark bond at this week’s purchase, further boosting demand for the note.
India bond yields seen easing after central bank doubles debt buy
It had bought around 50 billion rupees of the benchmark in its first debt purchase in January, but did not include it in the second auction.
The RBI has infused around 2.68 trillion rupees into the banking system over the last month through a combination of bond purchases, dollar/rupee swaps and longer-duration repos.
It has also been providing funds through daily overnight repos, adjusting their quantum based on the banking system’s requirement.
“For the time being, bonds have reacted to the latest developments, and for a further downward push in yields, the market would be looking at a fresh trigger, maybe like the amount the central bank accepts for the benchmark,” a trader with a private bank said.
US bond yields eased on Friday after data showed retail sales in the world’s largest economy tumbled in January, keeping alive hopes of a rate cut by the Federal Reserve later this year.
Investors expect 40 basis points of US rate cuts this year, higher than 33 bps late on Thursday, as per LSEG calculations.
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