India bonds to open higher as RBI backstop speculation grows louder

MUMBAI: Indian government bonds are expected to extend gains for a third session on Thursday, buoyed by rising speculation that the central bank would continue to support the market.

The benchmark 10-year 6.48% 2035 bond yield is likely to be in a 6.62%-6.67% range, a trader with a private bank said.

It ended at 6.6536% on Wednesday. Bond yields move inversely to prices. Investors from the ‘others’ category net bought bonds worth 30.2 billion rupees ($330.09 million) on Wednesday following purchases of 35.5 billion rupees on Tuesday, clearing house data showed.

The category’s main constituents include insurance companies, pension funds, corporates and the Reserve Bank of India.

“Buying numbers are clearly indicating that the central bank is active in the secondary market, and the way bonds moved yesterday, confidence that the RBI would continue to remain active for a day or two is rising,” the trader said.

In November, the central bank bought more than 272 billion rupees via screen-based trades in the secondary market, which traders attributed to replenishing a security that matured earlier in the month.

Traders said the central bank held around 200 billion rupees of another security maturing in January, and the buying might be for replenishment. Data on RBI purchases for the week ended January 16 will be released on Friday.

Later on Thursday, the central bank will buy bonds worth 500 billion rupees, which is the last operation under its current schedule.

Traders remain hopeful that the central bank will announce additional purchases for up to 2 trillion rupees over the next two months.