MUMBAI: Indian government bond yields are expected to trend marginally lower in early deals on Thursday, as market participants await the central bank’s large open market purchase of bonds.
The benchmark 10-year yield is likely to move between 6.67% and 6.70% till the auction result, a trader with a private bank said, compared with its previous close of 6.6859%.
Indian debt markets were closed on Wednesday for a local holiday.
The Reserve Bank of India will buy bonds worth up to 400 billion rupees ($4.60 billion) later in the day, the last leg of its mega liquidity infusion package announced in late-January.
“The previous cutoffs were very bearish as it showed banks were desperate to sell stock, so we will have to wait and see the response today, especially the amount of acceptance and the level for benchmark security,” the trader said.
Along with other papers, the RBI has also included the benchmark bond for its purchase.
It bought around 50 billion rupees of this paper in its first debt purchase in January, but did not include it in the second auction.
Over the last five weeks, the central bank bought bonds worth 600 billion rupees via auctions and another 388.15 billion rupees through secondary market screen-based purchases.
India bond yields seen steady before key events
It has injected around 440 billion rupees through a dollar/rupee buy/sell swap and 1.82 trillion rupees through four-day to 56-day repos.
The RBI has also been providing funds through daily overnight repos to keep overnight rates closer to the policy rate. Meanwhile, the minutes of the Federal Reserve’s January meeting showed that US President Donald Trump’s initial policy proposals raised concerns of higher inflation among its policymakers.
Traders will also await fresh supply of debt from New Delhi in its penultimate auction for the current financial year on Friday, which would be followed by the minutes of RBI’s February meeting, where it reduced repo rate for the first time in nearly five years.
Comments
Comments are closed for this article.