The yield on the benchmark 10-year bond was at 6.686% as of 9:45 a.m. IST, compared with its previous close of 6.2837% – the highest since May 13.
The five-year 6.75% 2029 bond yield was at 5.8589% after ending at 5.8842% on Monday.
Indian government bond prices rose on Tuesday after two sessions of decline, with the 10-year bond yield at 6.686%. Traders expect continued consolidation amid a neutral stance from the Reserve Bank of India, which limits further rate cut expectations.
“We were expecting some reversal from the 6.30% level, but it seems like the market considers current levels to be decent to build fresh positions,” a trader with a primary dealership said.
Bond yields jumped on Friday and Monday as markets were disappointed by the central bank’s shift in stance to “neutral”, signalling limited scope for rate cuts, after it delivered an outsized 50-basis point reduction.
The Reserve Bank of India also slashed lenders’ cash reserve ratio by 100 bps, which is expected to add to the liquidity surplus. The central bank has cut rates by 100 bps so far this year and is likely to pause this fiscal, according to a Reuters poll of economists. While some investors believe that the RBI’s rate cut cycle is over, ANZ, MUFG and Nomura expect at least one more reduction in 2025. RATES Shorter duration overnight index swap (OIS) rates were not yet traded but are expected to remain steady with a receiving bias.
The one-year OIS rate ended at 5.48% on Monday, while the two-year OIS rate closed at 5.47%. The most liquid five-year was little changed at 5.69%.
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