MUMBAI: Indian government bonds slipped on Monday, with the benchmark note closing at its lowest in more than two months, as robust economic growth data dimmed rate-cut hopes and as a tumbling rupee added to the pressure.
The benchmark 10-year yield jumped nearly 3 bps to close at 6.5732%, its highest since September 30. It ended at 6.5463% on Friday.
Bond yields rise when prices fall.
Data on Friday showed India’s economy grew at 8.2% in the July-September period, its fastest pace in 18 months, spurring many market participants to scale back their rate-cut bets.
The Reserve Bank of India’s rate-setting panel will meet on December 3-5. It has already slashed rates by 100 basis points between January and June but has kept policy on hold since then.
“The strong GDP prints reaffirmed our call of RBI remaining on pause in the December policy,” Gaura Sen Gupta, chief economist at IDFC First Bank wrote in a note.
“The strong growth in H2FY26 as well as positive growth momentum generated by GST cut indicates that the need for a rate cut is not there.”
Additionally, the rupee dropped to a record low of 89.7575 during the day, pressured by maturing non-deliverable forward positions alongside a persistent bearish pall on the currency as India remains the among the few major economies without a trade deal with U.S.
The RBI also stoked market uncertainty by pulling liquidity from the banking system, tempering the impact of the latest cash reserve ratio cut.
RATES
India’s overnight index swap rates jumped 2-5 bps on Monday, weighed by the slipping rupee and dimming rate cut hopes.
The one-year OIS ended at 5.4850%, while the two-year swap shut at 5.5075%. The five-year rate rose 4.75 bps to 5.8050%.
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