MUMBAI: Indian government bond yields dipped in early deals on Thursday ahead of the central bank’s bond purchase and the government’s debt auction scheduled for later in the day.
The benchmark 10-year bond yield was at 6.3793% as of 10:20 a.m. IST, compared with its previous close of 6.3889%.
The yield declined to 6.3730% earlier in the day, its lowest level since December 16, 2021.
“We have easily broken below 6.40% levels on the 10-year and the fall is sustaining, which is an indication that there could be a further decline in yields in the coming week,” a trader at a state-run bank said.
Bulls in the Indian bond market have steered yields lower, with the 10-year yield down 20 basis points (bps) since the start of the fiscal on April 1.
Yields are likely to drop further as the central bank continues its rate easing cycle.
Yields on shorter duration bonds have outpaced those in the 10-year benchmark, with five-year yields down 35 bps so far in April.
India bond yields may remain lower as easing inflation to favour bulls
The Reserve Bank of India (RBI) is due to buy 400 billion rupees ($4.68 billion) of bonds maturing from 2028 to 2039 on Thursday, while the central government is set to sell bonds worth 300 billion rupees, effectively resulting in negative net supply for the day.
The RBI has already bought bonds worth 400 billion rupees this month, and is set to purchase a similar quantum later in the month.
Banking system liquidity surplus stayed at around 1.7 trillion rupees as of April 16, but has risen consistently since end-March.
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