MUMBAI: Indian government bonds fell for a second day on Friday due to increased supply, and as a key investor class, which includes the central bank, cut down purchases.
The yield on the benchmark 10-year note closed at 6.5265% after ending at 6.5161% on Thursday.
Bond yields rise when prices fall.
The “others” category of investors, which includes the Reserve Bank of India, slowed purchases for a second straight session, buying a net 9.2 billion rupees ($104.7 million) of debt on Thursday, much lower than the daily average of 50 billion rupees in the first six sessions of November, CCIL data showed.
The RBI bought bonds worth 124.70 billion rupees on a net basis in the week ending November 7, and was on the bidding side for three of the four sessions, according to data on the central bank’s website.
Meanwhile, New Delhi sold 280 billion rupees worth of 15-year and 40-year bonds on Friday. The auction sailed through but failed to revive investor sentiment toward the long-term notes.
The focus is now on the RBI’s policy path, with the market divided on the odds of a December rate cut.
There is uncertainty over whether the RBI will adjust rates next month amid a possible U.S. trade deal, even as retail inflation dropped to a record low in October.
“This is a low inflation regime with a downward bias on growth,” said Alok Singh, head of treasury at CSB Bank.
“I believe we have two rate cuts still to go before we take a decision on further rate easing.”
RATES
India’s overnight index swap (OIS) rates rose on Friday as investors pared bets of a December rate cut.
The one-year OIS rose 2 bps to 5.48%, while the two-year rate was up 2.25 bps at 5.4625%. The liquid five-year swap rate advanced 3 bps to 5.7350%.
American Dollar Exchange Rate