New Delhi: On Monday, the Indian 10-Year Government Bond Yield hit new lows, last seen in November 2021, very near the 3-year lowest. The benchmark yield slipped to 6.3275% early in the session before settling at 6.3575%, in comparison to Friday's closing of 6.3709%.
The possibility of a key debt purchase by the RBI and the scheduled public release of the BOI meetings this week have led to these drops.
Bond purchases worth ₹200 billion (about $2.4 billion) by the RBI will take place on Tuesday, including long-dated papers like the 8.30% 2040 bond and the 9.23% 2043 paper. They see part of a larger injection of funds of ₹1 trillion into the market this month.
Analysts believe the RBI's focus on long-duration bonds here is strategic, given that yield spreads between 10-year bonds and ultra-long bonds have reached over 50 basis points, a three-year wide.
A strong bullish market is supported by an easing of inflation, a dovish posture, and liquidity from the RBI. "There are very few things indicating negatively that could halt bond price rally upward momentum," a trader from a private bank commented amid the rally.
They also await the RBI's April policy minutes, due on Wednesday, which could further assist the market with clues as to the rate path ahead. After effecting a 25-basis-point cut in the repo rate, the central bank shifted its stance from "neutral" to "accommodative", with the stated objective of boosting growth amid growing concerns of a liquidity squeeze in the money market.
Overnight index swap (OIS) rates declined further with two- and five-year rates down by 3-4 basis points, intensifying expectations of continued easing.
[Source Credit: Business Recorder]
