India bonds edge higher as RBI tames dollar bulls a day after giving them free rein

MUMBAI: Indian government bonds recovered slightly from the previous session’s losses in early deals on Monday, after a sharp reversal in the local currency which had dropped to a record low on Friday.

The benchmark 10-year yield was at 6.5636% as on 10:00 a.m. IST, after closing at 6.5665% on Friday. Bond yields move inversely to prices.

The Reserve Bank of Indian likely intervened to support the rupee before the local spot market open, four traders told Reuters.

This pushed the rupee higher, and the currency was around 89.15, after hitting a fresh record low of 89.49 on Friday.

“With such major moves, the currency has become the primary trigger for bond markets for now, as any change in the RBI’s strategy, could have a meaningful impact on foreign investment in bonds,” trader with a primary dealership said.

Apart from the currency, the market will also remain focused on the Reserve Bank of India’s next steps to manage liquidity as well as bond yields.

The RBI bought bonds worth 148.10 billion rupees ($1.66 billion) in the week ended November 14, after purchasing 124.70 billion rupees in the prior week.

The purchases have had little lasting impact on the market though as traders are confident that they were aimed at replacing maturing holdings rather than signaling for lower yields.

Meanwhile India’s economy likely grew 7.2% in the July-September quarter, according to a Reuters poll, after expanding 7.8% in April-June.

The official data will be released on Friday.