India bonds rally after Reserve Bank’s $32 billion liquidity boost

MUMBAI: Indian government bonds rallied in early trade on Wednesday after the central bank announced a large liquidity injection for the coming month, easing concerns over near-term debt supply.

The benchmark 10-year yield was at 6.5679% as of 9:50 a.m. IST, after closing at 6.6328% on Tuesday.

Bond yields move inversely to prices. The Reserve Bank of India said it will infuse about 2.90 trillion rupees ($32.42 billion) into the banking system through open market bond purchases and a dollar-rupee swap.

The RBI will buy government bonds worth 2 trillion rupees in four tranches between Dec. 29 and Jan. 22, and conduct a $10 billion three-year dollar-rupee buy/sell swap on Jan. 13.

“This is what the market needed, a calendar for bond buying which give more clarity on where things are headed and also helps improve auction demand,” a trader with a state-run bank said.

The 10-year yield had fallen about 7 basis points from Tuesday’s session high on speculation the RBI was buying bonds in the secondary market.

Data for the “others” category, which includes RBI activity, showed net purchases of 47.4 billion rupees, reinforcing that view.

The central bank has already bought 1 trillion rupees of bonds and conducted a $5 billion foreign exchange swap this month.

For 2025, the RBI has bought bonds worth 6.5 trillion rupees, which is already a record high.

Markets were wary of rising borrowing costs, with analysts estimating aggregate debt supply of about 8.1 trillion rupees between January and March.