MUMBAI: Indian government bonds gave back some gains from their three-day rally on Thursday as traders booked profits and shifted focus to upcoming GDP data that could influence expectations for further rate cuts.
The benchmark 10-year yield finished at 6.5082%, up from 6.4934% on Wednesday, its lowest close since November 10.
Yields move inversely to prices.
India’s July-September growth data is due on Friday and the economy likely grew 7.3%, according to a Reuters poll, after expanding 7.8% in April-June.
“Friday’s growth report is likely to print a firmer-than-consensus 7.5%, though with annual inflation below 2% and the current quarter’s to average below 1%, we maintain our view for a 25 bps cut at the December meeting,” said Radhika Rao, executive director and senior economist at DBS Bank.
“Commentary will be balanced, to prevent a redux of post-June hardening in bond yields.”
The 10-year benchmark bond yield had slipped as much as 8 basis points this week, as dovish comments from Reserve Bank of India Governor Sanjay Malhotra on Monday reignited rate cut expectations on December 5.
The RBI is expected deliver a rate cut next week, according to a majority of economists polled by Reuters. However, they expect the rate to stay put through 2026.
The central bank has already slashed rates by 100 bps in January-June but has maintained status quo since then.
Traders will also eye demand at a debt auction on Friday, wherein the central bank will sell bonds worth 320 billion rupees ($3.58 billion).
Rates
India’s overnight index swap (OIS) rates inched up in line with government bond yields, and will react to growth data on Friday.
The one-year OIS ended at 5.43%, while the two-year rate closed at 5.4175%. The five-year rate settled at 5.7025%.
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