MUMBAI: Indian government bonds edged higher in early deals on Tuesday after a two-day selloff, while volumes remained muted ahead of the state debt supply and the U.S. rate decision due a day later.
The yield on the benchmark 10-year bond was at 6.3631% at 10:25 a.m. IST, compared with the previous close of 6.3700%.
Bond yields move inversely to prices.
Traders said the benchmark bond yield was unable to break past a key technical upside level, so there is some reversal in trend.
Investors took a break from selling, which was triggered by falling bets of an immediate rate cut following hawkish commentary from the Reserve Bank of India Governor Sanjay Malhotra.
On Friday, Malhotra said that the monetary policy will place greater emphasis on the outlook for growth and inflation, rather than their current levels.
India bonds extend fall as August rate-cut bets fade
“Traders are mostly on the sidelines till the RBI policy decision as there is no incentive for taking positions,” a trader at a state-run bank said.
“Focus is on U.S. Fed Chair Jerome Powell’s commentary, which could give more cues on domestic policy easing cycle for FY25.”
The Federal Reserve is widely expected to keep interest rates unchanged on Wednesday.
Meanwhile, Indian states are aiming to raise 300 billion rupees ($3.46 billion) via bond auctions later in the day, slightly exceeding the scheduled amount.
Rates
India’s overnight index swap (OIS) rates saw receiving pressure in early trades, as the 10-year bond yield failed to breach key technical level, spurring some buying.
The one-year rate dropped 2 basis points to 5.52%, while the two-year OIS rate fell 2 basis points to 5.50%. The liquid five-year OIS rate was down 1 basis point at 5.73%.
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