MUMBAI: Indian government bond yields and overnight index swap rates both eased in early trading on Tuesday, as dovish commentary from the Reserve Bank of India governor in an interview eased concerns about the interest rate trajectory.
The yield on the benchmark 10-year bond was at 6.2622% as of 9:45 a.m. IST, compared with its previous close of 6.2732%.
The five-year 6.75% 2029 bond yield was at 5.9362% after ending at 5.9642%.
Inflation below the central bank’s current projections could open up policy space, India’s central bank chief Sanjay Malhotra told Business Standard newspaper in an interview, adding that incoming data will be watched closely to strike “the right growth-inflation balance”.
The change in stance “does not imply an immediate reversal in the policy cycle”, Malhotra said in the interview published on Tuesday.
Earlier this month, the RBI cut its policy repo rate by a steeper-than-expected 50 basis points, but changed its stance to ‘neutral’ from ‘accommodative’, prompting analysts to forecast the end of the rate-cutting cycle.
“There is some buying support as the commentary has made the bulls active for now,” a trader with a private bank said. Meanwhile, oil prices rose marginally, but the benchmark Brent crude contract stayed below $75 per barrel in Asian hours on Tuesday.
India bond yields dip on value buying, fall in US peers
Oil prices have been rising amid concerns about supply disruptions due to the conflict in the Middle East.
India imports a bulk of its crude oil needs. Higher prices could affect the nation’s inflation outlook.
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