MUMBAI: India’s 10-year government bond yield posted its steepest decline in 12 weeks, mirroring the move in U.S. Treasuries and as some traders bet on dovish commentary at the local central bank’s policy meeting on Wednesday.
The yield on the benchmark bond ended at 6.3179%, falling the most since May 13, compared with the previous close of 6.3680%.
The yield on the U.S. 10-year bond was at 4.2277% in Asian hours after slipping to a three-month low on expectations that the Federal Reserve would cut interest rates as soon as September after a weak jobs report.
The Reserve Bank of India, which announces its policy decision on Wednesday, is expected to hold rates steady, but investors will closely watch for remarks on inflation and growth to gauge the rate trajectory.
The odds of an India rate cut have risen since the United States slapped steep tariffs on the country’s imports, prompting concerns around growth.
“We expect RBI to maintain status quo, keeping the repo rate and policy stance unchanged,” STCI Primary Dealer said in a note. “Expect a downward revision of 20-30 basis points in both the inflation forecast and growth forecast.”
India bond yields end flat, rise marginally this week ahead of RBI meet
Meanwhile, foreign investors broke a three-month net selling streak, pouring into the two extreme ends of India’s yield curve in July.
Overall, they purchased 25 billion rupees of index-linked bonds last month.
Rates
India’s overnight index swap rates slipped on strong receiving bias on Monday, as the rates tracked a decline in domestic bond yields and U.S. Treasury peers.
The one-year OIS rate dipped nearly 6 basis points to 5.4475% and the two-year OIS rate dropped over 6 bps to 5.4050%. The liquidfive-year OIS rate lost over 7 bps to end at 5.6425%.