The yield on the benchmark 10-year bond was at 6.2622% as of 9:45 a.m. IST, compared with its previous close of 6.2732%.
The five-year 6.75% 2029 bond yield was at 5.9362% after ending at 5.9642%.
Indian government bond yields decreased early Tuesday. Overnight index swap rates also saw a reduction. Reserve Bank of India governor’s dovish comments influenced the market. These comments eased concerns about interest rates. Traders are watching oil prices. Lower inflation could lead to another rate cut this financial year. The central bank will closely monitor incoming data.
Inflation below the central bank’s current projections could open up policy space, India’s central bank chief Sanjay Malhotra told Business Standard newspaper in an interview, adding that incoming data will be watched closely to strike “the right growth-inflation balance”.
The change in stance “does not imply an immediate reversal in the policy cycle”, Malhotra said in the interview published on Tuesday.
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Earlier this month, the RBI cut its policy repo rate by a steeper-than-expected 50 basis points, but changed its stance to ‘neutral’ from ‘accommodative’, prompting analysts to forecast the end of the rate-cutting cycle. “There is some buying support as the commentary has made the bulls active for now,” a trader with a private bank said. Meanwhile, oil prices rose marginally, but the benchmark Brent crude contract stayed below $75 per barrel in Asian hours on Tuesday. Oil prices have been rising amid concerns about supply disruptions due to the conflict in the Middle East.
India imports a bulk of its crude oil needs. Higher prices could affect the nation’s inflation outlook. RATES Overnight index swap rates eased across the curve as the comments renewed hopes that consistently lower inflation readings could allow one more rate cut from the central bank in this financial year.
The one-year OIS rate and the two-year OIS rate were down 3 basis points each to 5.49% and 5.48%. The most liquid five-year was 4 bps lower at 5.69%.
