MUMBAI: Indian government bonds gained on Tuesday, recovering from the day’s losses, as strong demand at the weekly state debt sale signalled renewed investor interest ahead of the release of borrowing plans for the second half of the fiscal year.
The yield on the 10-year benchmark note closed at 6.4729%. It ended at 6.4885% on Monday.
Bond yields move inversely to prices.
The benchmark yield crossed 6.50% during the day, pushing bullish traders to pile in before any potential breach of the key technical level of 6.52%.
Market sentiment got a boost from the weekly state debt auction.
“We saw some good demand from investors in today’s SDL auction as the cut-offs were better than expected,” said Umesh Tulsyan, managing director at Sovereign Global Markets.
Traders are also lapping up debt ahead of the Reserve Bank of India’s monetary policy announcement due on October 1.
Some market participants are anticipating dovish commentary from the RBI in the upcoming policy meet, but expect the central bank to keep the rates steady, traders said.
Traders are still factoring in at least a 25-bp cut later this year, they said.
In June, RBI cut its policy repo rate by 50 bps but changed stance to neutral, while in August it maintained status quo.
Rates
India’s overnight index swaps ticked up on Tuesday. Traders said this had to do with position-hedging amid a drop in bond yields.
The one-year OIS rate rose 1.5 bps to 5.46%, while the two-year OIS rate was up 1 bp at 5.4325%. The liquid five-year OIS rate settled 2.5 bps higher at 5.72%.
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