Indian bonds hold firm on rate-cut hopes

MUMBAI: Indian government bonds were steady in early deals on Wednesday, with the 10-year yield anchored below the key 6.50% mark amid heightened bets of a rate cut next week.

The benchmark 10-year yield was at 6.4937% as of 10:15 a.m. IST.

It ended at 6.4984% in the previous session. Bond yields rise when prices fall.

Bonds rallied over the last two sessions on hopes of a rate cut after the Reserve Bank of India Governor Sanjay Malhotra told local news media that the recent macroeconomic readings have not constrained the room to ease rates.

India’s inflation fell to a record low of 0.25% in October.

GDP data for July-September, due on Friday, is likely to show the economy grew 7.3%, according to a Reuters poll.

The central bank lowered the repo rate by 100 basis points to 5.5% between February and June, but has held rates since then.

At the October meeting, Malhotra had said that there is room to cut policy rates. The rate-setting panel meets on December 3 to 5.

Traders see room for a further rally in bonds if the 10-year yield holds below 6.50%, which is likely to see strong buying interest.

“If 10-year yield closes below 6.50% we may have another 5-7 basis point rally,” said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank.

A strong bullish momentum in US Treasuries is also supporting market sentiment, traders said.

The 10-year US Treasury yield has also come off about 13 basis points in the last four sessions on hopes of US rate cuts.‑Reuters