India’s 10-year bond yield stays near over 3-year low ahead of RBI note purchase

MUMBAI: Indian government bond yields slipped in early deals on Monday, with the 10-year yield hovering near a more than three-year low, ahead of the central bank’s debt purchase and minutes of its latest policy meeting this week.

The benchmark 10-year yield was at 6.3575% as of 10:15 a.m. IST, compared with Friday’s close of 6.3709%.

Earlier in the day, it fell to 6.3275%, the lowest since November 30, 2021.

“We have picked up from where we had left the market last week, and there is no stopping to the relentless and nearly one-way rally in bond prices for now as there are hardly any negative factors that will impact bonds,” a trader with a private bank said.

The Reserve Bank of India is set to buy bonds worth up to 200 billion rupees ($2.4 billion) on Tuesday, including the 8.30% 2040 and 9.23% 2043 notes, taking its total purchases for April to 1 trillion rupees.

The RBI has included longer-tenor papers in its purchase at a time when spreads between the 10-year and ultra-long bonds have risen above 50 basis points, the highest in three years.

Traders await the minutes of the central bank’s April policy meeting, which are due on Wednesday, to assess the future rate trajectory.

India bond yields may remain lower as easing inflation to favour bulls

The central bank cut repo rate by 25 bps and changed its stance to “accommodative” from “neutral” at the policy. The central bank chief flagged concerns of dwindling liquidity in the call money market in a speech published on Saturday.

Rates

India’s overnight index swap rates are expected to maintain their downward trajectory as the central bank continues to pump liquidity and US Treasuries are steady.

The one-year OIS rate was yet to be traded, while the two-year and the five-year OIS rates declined 3 basis points and 4 basis points, respectively, in early deals.