The yield on the benchmark 10-year bond was at 6.2836% as of 10:00 a.m. IST vs its previous close of 6.2946%, the highest since May 9.
The five-year 6.75% 2029 bond yield was at 5.9334% after ending at 5.9513% in the previous session.
“For now it seems the selloff may be behind us, with the market gaining confidence from heavy purchases by state-run banks yesterday,” a trader with a private bank said.
These lenders bought over 125 billion rupees ($1.46 billion) of bonds on a net basis in the last two sessions.
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Bond yields have risen since Friday after the Reserve Bank of India’s shift in stance to “neutral” from “accommodative” disappointed investors, signalling limited scope for further rate cuts after an outsized 50-basis point reduction. Weak demand for state debt at an auction on Tuesday pushed up yields further. The RBI is likely to keep rates on hold for the rest of this fiscal year, according to a Reuters poll of economists.
Mid- to long-term bond yields have risen despite the steepest rate cut in five years as traders believe the RBI’s easing cycle may be over, with some shifting their preference to the shorter end of the curve. RATES
Indian overnight index swap (OIS) rates eased across the curve, tracking a lower bond yields.
The one-year OIS rate ended was at 5.50%, after ending at 5.54% on Tuesday, while the two-year OIS rate was at 5.48% compared to its previous close of 5.51%. The liquid five-year swap was down 4 bps at 5.69%. ($1 = 85.4950 Indian rupees)
