MUMBAI: Indian government bonds ended largely unchanged on Thursday as traders awaited a fresh debt supply and further cues on liquidity management from the central bank.
The yield on the benchmark 10-year bond ended at 6.3156%, after closing at 6.3136% on Wednesday. Bond yields move inversely to prices.
“Market sentiment remains cautious amid tight liquidity signals from the Reserve Bank of India via Variable Rate Reserve Repos (VRRR),” Pawan Somani, founder of Infinask Advisors, said.
The 10-year note has hovered between 6.28% and 6.32% since the start of the month, and the trend is likely to continue amid fresh triggers, traders said.
New Delhi plans to sell bonds worth 250 billion rupees ($2.92 billion) on Friday, including a new seven-year note.
RBI’s liquidity withdrawal move weighs on India bond prices
The note traded at around 6.25% in the ‘when-issued’ segment of the trading platform on Thursday.
Market focus is also on liquidity levels in the banking system and on any further measures by the RBI to drain the surplus.
The RBI’s second liquidity-absorbing operation in four sessions on Wednesday pushed overnight rates above the floor of the policy corridor.
The newly launched Secured Overnight Rupee Rate (SORR) has stayed above the floor of monetary policy corridor for the second straight session after slipping below the Standing Deposit Facility rate on Monday and Tuesday.
The central bank removed 973 billion rupees via a two-day VRRR\ on Wednesday.
Traders said clarity on a potential U.S.-India trade deal, which U.S. President Donald Trump said was “close”, would be a key trigger for the market.
Rates
India’s overnight index swap rates (OIS) were mostly flat as traders awaited more cues, with the trading range shrinking across the curve.
The one-year OIS rate was at 5.515%, and the two-year OIS rate was at 5.4875%. The liquid five-year OIS rate was at 5.69%.
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