MUMBAI: Indian government bond yields eased on Tuesday, in line with their U.S. Treasury peers and lower oil prices, while elevated liquidity levels further supported the market.
The yield on the benchmark 10-year note ended at 6.2927%, compared with the previous close of 6.3241%.
The 10-year U.S. Treasury yield fell to 4.1929% in Asian hours, its lowest level in 2 months, versus the previous close of 4.2260%.
Oil prices remained subdued and was last at $67.27 per barrel, about $11 lower than June’s high of $78.85 per barrel.
“People are taking a view at the start of the quarter, with some building positions as the U.S. yields and oil prices have fallen,” said Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank.
“Ample liquidity in the system is also providing comfort, so some investment demand has emerged.”
India’s daily average banking system liquidity surplus rose to 2.74 trillion rupees in June, marking its highest level in three years.
Traders are now awaiting cues on the Reserve Bank of India’s liquidity moves after it conducted a seven-day variable rate reverse repo (VRRR) auction on Friday, withdrawing 850 billion rupees from the banking system.
The weighted average call rate rose to 5.50% on Monday, reaching the central bank’s policy rate for the first time in the financial year.
Weighted average TREPS rate also rose to 5.42%.
Foreign investors also stepped up purchases in the second half of June, offsetting the majority of the selling in the first half.
They had net sold over 130 billion rupees in bonds by June 18, but the figure narrowed to 7.2 billion rupees for the month, CCIL data showed.
Rates
India’s overnight index swap rates saw receiving bias on Tuesday, with the longer-duration rates leading the fall.
The one-year OIS rate dropped 1 basis point to 5.52%, while the two-year OIS rate declined 2 bps to 5.49%, and the most liquid five-year dropped 4 basis points to 5.67%.
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