The yield on the new benchmark 10-year bond was at 6.2017% as of 10:00 a.m. IST, compared with the previous close of 6.2062%. The 2034 bond yield was at 6.2496% after settling at 6.2449% on Wednesday.
“Traders are only focused on local factors for now, ignoring what is happening in the rest of the world, and hence we are expected to see a further rally in bond prices in the coming days,” a trader with a primary dealership said.
Indian government bond yields experienced a slight decrease in early trading on Thursday, fueled by optimistic market sentiment and expectations of future policy rate cuts. State-run banks’ substantial bond purchases have further contributed to the decline in yields. Traders are anticipating the central bank’s dividend transfer to the government, while closely monitoring U.S.
Bond yields have declined for two straight sessions as investors continue to bat for more rate cuts from the Reserve Bank of India in the coming months.
State-run banks have net bought over 260 billion rupees ($3 billion) of bonds over the last five sessions, further pushing yields lower.
Traders await the central bank’s dividend transfer to the government for the previous financial year. Economists expect the central bank to transfer a record surplus this year, surpassing the 2.1 trillion rupees in the previous year. U.S. Treasury yields jumped on Wednesday due to a weak auction, as investors continued to monitor the progress of a tax bill in Congress, which will worsen the U.S. budget deficit.
The 10-year U.S. yield hit a three-month high and stayed around 4.60% mark, having risen over 40 basis points in May. RATES India’s overnight index swap (OIS) rates were trading flat to marginally higher, in reaction to the spike in U.S. yields.
The one-year OIS rate was not yet traded after ending at 5.56% on Wednesday, while the two-year rate was unchanged at 5.45%.
The most liquid five-year rate was up 2 basis points to 5.65%, after dropping 5 bps on Wednesday. ($1 = 85.6410 Indian rupees)
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