MUMBAI: Indian government bond yields slipped in early trading on Monday, tracking a fall in US Treasury yields, while the central bank’s liquidity infusion and dovish commentary aided sentiment.
The benchmark 10-year yield was at 6.6990% as of 9:30 a.m. IST, compared with its previous close of 6.7065%.
The 10-year US Treasury yield fell to a two-week low on Friday after several data releases pointed to slowing growth, leading traders to increase bets that the Federal Reserve will cut rates two times this year.
US business activity tumbled to 17-month low, while US consumer sentiment dropped more than expected in February to a 15-month low and US existing home sales dropped more than expected in January.
India bond yields flattish amid consolidation, fresh cues eyed
“A string of poor data bode well as far as rate easing expectaions are concerned in the US and that will also help the local scenario,” trader with a state-run bank said.
Domestically, the Reserve Bank of India will conduct a three-year dollar/rupee buy/sell swap auction on February 28, which will lead to a liquidity infusion of around 870 billion rupees ($10.04 billion).
Since mid-January, the RBI has infused more than 3.6 trillion rupees into the banking system, including through 1 trillion rupees of open market operations (OMOs) and 388.15 billion rupees through secondary market bond purchases.
The RBI also infused around 440 billion rupees through a six-month dollar-rupee swap, also injected 1.83 trillion rupees via long-term repos as part of the package.
India’s inflation is seen aligning with the target of 4%, which opens up space for monetary policy to address concerns on the growth front, members of the rate-setting committee said in the minutes of the RBI’s latest meeting released on Friday.
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