MUMBAI: Indian government bond yields are expected to be largely unchanged in opening deals on Wednesday ahead of the central bank’s monetary policy decision, with market participants expecting a dovish decision and guidance.
The benchmark 10-year bond yield is likely to move between 6.46% and 6.49% till the policy decision at 10:00 a.m. IST, a trader at a private bank said, compared to its previous close of 6.4747%.
“Traders are mostly positioned for a bullish undertone in the policy, but if they do not deliver anything apart from a 25-basis-point rate cut, there could be heavy selling pressure, leading to a breach of 6.50% level,” the trader said.
The Reserve Bank of India is set to deliver a second rate cut this year on Wednesday amid risks to growth in the aftermath of U.S. import tariffs. Investors will closely monitor the RBI’s commentary and a potential change in stance for future policy clues.
Investors have already factored in 25 bps rate cut, while the overnight indexed swap (OIS) rates have fallen so far this month, signalling that the RBI could also change its stance along with a rate cut.
Bets of aggregate rate cuts from the central bank in 2025 have risen to 100 bps from 75 bps. The RBI kicked off the policy easing cycle in February after a near five-year hiatus.
India bond yields rise slightly tracking US Treasuries; traders eye RBI policy
Citi, HSBC and Nomura anticipate the RBI to cut repo rate by 25 bps each in April, June and August.
“The markets will be expecting continued support measures on liquidity and also a possible policy stance change to accommodative,” STCI Primary Dealer said in a note.
The focus will also be on liquidity guidance, especially as bankers have sought comfort from the availability of overnight liquidity.
The RBI has infused over 5.4 trillion rupees ($62.62 billion) into the banking system since the start of 2025 through debt purchases and foreign exchange swaps, and will buy bonds worth 400 billion rupees in April.
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