MUMBAI: Indian government bonds ended flat on Monday, with market participants cautiously awaiting details of New Delhi’s borrowing plan for the second half of the fiscal year.
The yield on the 10-year benchmark note settled at 6.4885%, matching the previous close of 6.4885%.
The upcoming borrowing calendar release, slated for late September, will be a key trigger for the market as investors are concerned about the supply of longer tenor debt potentially exceeding demand.
Earlier this month, several market participants recommended that the Reserve Bank of India consider reducing the proportion of ultra-long bonds and cutting the size of weekly auctions.
“Announcement of second half borrowing calendar will be keenly awaited and duration supply there will decide next market movement,” said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank.
Also in focus is the RBI’s upcoming policy decision, due October 1, where the RBI is expected to hold rates steady. A 25-basis-point cut later in the year is what many market participants are factoring in, traders said.
That’s even as Soumya Kanti Ghosh, group chief economic adviser at India’s largest lender State Bank of India, said the central bank’s best bet is to slash the key interest rate by 25 bps at the next opportunity, given that inflation remains benign.
In June, RBI cut its policy repo rate by 50 bps but changed stance to neutral, while in August it maintained status quo.
Rates
India’s overnight index swap rates ended little changed after dropping in the previous session.
Traders see room for receiving in India’s shorter-duration overnight index swap rates on bets of further RBI easing by December.
The one-year OIS rate ended at 5.4475%, while the two-year OIS rate closed at 5.42%.
The liquid five-year OIS rate rose 1 bp to settle at 5.72%.
American Dollar Exchange Rate