MUMBAI: Indian government bonds started the week on a positive note, on growing expectations that the central bank will continue buying bonds, keeping a lid on yields.
The yield on the benchmark 10-year note ended at 6.4883%, after closing at 6.5142% on Friday. The new 10-year 6.48% 2035 bond yield ended at 6.4530%. Bond yields move inversely to prices.
Expectations of bond purchases by the Reserve Bank of India kept the market supported, said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank.
“Going ahead, we expect the new 10-year bond yield to trade between 6.40%-6.50% in the near term as room for rate cut opens up.”
Investors from the “others” category, which includes the Reserve Bank of India, insurers, pension funds and corporates, net bought bonds worth 205 billion rupees ($2.3 billion) last week, the segment’s biggest weekly purchase in nearly five years, per clearing house data.
At a meeting with the central bank last week, traders had urged the RBI to buy government debt and tweak the auction rules to ease pressure on the bond market, Reuters reported.
Meanwhile data on India’s October retail inflation is due Wednesday. The pace of price rises is expected to have slowed by more than a full percentage point to 0.48% from 1.54% in September, per a Reuters poll, its lowest in the current 2012-base series.
The RBI has cut the repo rate by 100 basis points so far in 2025, with the next decision due on December 5.
RATES
India’s longer-end overnight index swap (OIS) rates inched up tracking U.S. Treasury yields, while the shorter duration rates dipped.
The one-year OIS rate dipped 1.5 bps to 5.47%, while the two-year rate inched up to 5.4575%. The five-year swap rate added 1 bp to end at 5.72%.
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