MUMBAI: Indian government bonds kicked off the holiday-shortened week on a subdued note, with yields on most papers ending largely unchanged as traders awaited fresh triggers.
The yield on the benchmark 10-year note ended at 6.5040% on Monday, after closing at 6.5131% on Friday. Bond yields move inversely to prices.
Indian debt markets are shut on Tuesday and Wednesday for the Diwali festival. The central government will not conduct any debt auction this week.
States raised 170 billion rupees ($1.9 billion) through the sale of bonds earlier in the day, while the central government switched bonds worth around 116 billion rupees.
Bond yields fell last week, as the minutes of the Reserve Bank of India’s latest meeting reaffirmed bets of a rate cut in December.
The interest-rate panel members flagged room for future cuts as the country’s inflation outlook eases, minutes of the October meeting showed.
India’s retail inflation dropped to an eight-year low of 1.54% in September. HDFC Bank anticipates the reading at a record low of 0.5% in October.
ICICI Securities Primary Dealership expects the central bank to cut the repo rate by 25 basis points in December.
The bond house said “the focus would be on tone of the communication and whether the committee will still wish to unleash a dovish commentary and openness to cut based on soft inflation profile. That is going to be trickier to manage, even as the RBI should sound more balanced.”
RATES
India’s overnight index swap (OIS) rates were flattish amid thin volumes, with the session wedged between holidays.
The one-year OIS rate ended at 5.4225%, while the two-year OIS rate ended at 5.36%. The five-year swap rate closed at 5.6050%.
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