MUMBAI: Indian government bonds fell for a fifth straight session on Monday, as investors scaled back bets of an interest rate cut in the near term following comments from the central bank chief.
The yield on the benchmark 10-year bond ended at 6.3700%, compared with Friday’s close of 6.3505%. The yield has risen about 7 basis points in the last five sessions.
Bond yields move inversely to prices.
Reserve Bank of India Governor Sanjay Malhotra on Friday told Financial Express in an interview that monetary policy will place greater focus on the outlook for growth and inflation, rather than their current levels.
Malhotra added that the bar for further easing is higher than it would have been if the stance was “accommodative”.
Traders had expected easing inflation to lead to another rate cut.
Still, a majority of economists polled by Reuters expect the central bank to keep rates on hold when it announces its next policy decision on August 6.
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“Bond markets traded in a narrow range with a weakening bias on receding expectations of an additional rate cut(s) by the RBI after marginally hawkish commentary by the Governor,” said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.
Investors also await the Federal Reserve’s policy decision, due on Wednesday. The U.S. central bank is widely expected to keep rates unchanged.
Rates
India’s overnight index swap rates rose marginally as sentiment soured in the derivatives market.
The one-year OIS rate ended at 5.54% and the two-year OIS rate at 5.52%. The liquid five-year OIS rate settled at 5.74%.
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