MUMBAI: India bonds declined on Wednesday, weighed down by the domestic central bank’s latest plans to further drain liquidity and a weakness in US Treasuries.
The yield on the benchmark 10-year bond was at 6.3125% as of 10:30 a.m. IST, compared with Tuesday’s close of 6.3053%.
The five-year 6.75% 2029 bond yield was at 5.9704%, up from the previous close of 5.9569%.
Yields move inversely to bond prices.
The Reserve Bank of India (RBI) will conduct a two-day variable rate reverse repo worth 1 trillion rupees ($11.64 billion) on Wednesday, it said after market hours on Tuesday.
Last week, the RBI withdrew a similar quantum from the system via a seven-day liquidity withdrawal operation.
“There are no positive cues for bonds right now, and factors like elevated US Treasury yields, rising oil prices and RBI’s VRRR operation are acting as negative triggers,” a trader with a state-run bank said.
“Bonds should still remain range-bound, with the 10-year expected to trade between 6.29%-6.32% during the day.”
The daily average liquidity surplus stood at about 3.85 trillion rupees so far this month, which is more than 1.5% of the banking system’s total deposits.
The market is also awaiting clarity on a potential US-India trade deal before taking a direction call, the trader said.
The 10-year US yield remained above 4.40% as President Donald Trump ramped up his trade war by sending out letters to key trading partners, notifying them of sharply higher tariffs from August 1.
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