India bonds flat as traders look ahead to RBI policy; liquidity ebbs
ADVERTISEMENT The yield on the benchmark 10-year bond was at 6.2993% as of 10:45 a.m. IST, compared with Monday's close of 6.2996%.
Bond yields move inversely to prices.
"Liquidity is a bit tight after 2 trillion rupees were parked in the central bank's VRRR auction, so we are not taking a view right now," a trader at a private bank said. India's banking system liquidity surplus stood at around 2.4 trillion rupees as on July 21, the lowest level in seven weeks, which has pushed up overnight rates. New Delhi will sell 300 billion rupees ($3.48 billion) of the benchmark 2035 paper on Friday.
ADVERTISEMENT The 10-year benchmark yield will likely oscillate between 6.29%-6.32% till the central bank policy announcement, traders said. The next monetary policy decision from the central bank is due on August 6, with some traders anticipating another rate cut.
ADVERTISEMENT The Reserve Bank of India slashed its key interest rate by 50 basis points last month, while changing its stance to "neutral" from "accommodative", which soured sentiment as market participants looked at the moves as limiting room for more easing. A lower-than-expected June inflation reading however, revamped expectations for further rate cuts. Retail inflation eased to 2.10%, the slowest pace in over six years.
ADVERTISEMENT RATES India's overnight index swap rates remained rangebound in early deals, with slight upward pressure after heightened receiving bias on Monday.
The one-year OIS rate inched up to 5.49%, while the two-year OIS rate was little changed at 5.46%. The liquid five-year OIS rate also edged higher to 5.69%.
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Modi's presence as guest of honour at the Maldivian Independence Day celebrations will mark a significant turnaround in bilateral ties that turned frosty because of the policies of Muizzu, who came to power on the back of an 'India Out' campaign in late 2023. Misri attributed the turnaround in ties to India's working hard on the relationship. 'There will always be events that will impact or try to intrude on the relationship. But I think this is testimony to the kind of attention that has been paid to the relationship, including attention at the highest levels…We've continued to work at it, and I think the result is there for you to see,' he said. The Maldives is a 'very important partner' in India's Neighborhood First policy MAHASAGAR (Mutual and Holistic Advancement for Security and Growth Across Regions) vision, Misri said. 'We have always been the first on hand to respond to the needs of Maldives in times whenever it has faced has been a robust political relationship…bolstered by regular visits at high levels,' he said. The joint vision for a comprehensive economic and maritime security partnership adopted during Muizzu's visit to India last October 2024 has become the 'guiding framework' for ties, and India is one of the largest trade partners of the Maldives, with two-way trade worth almost $500 million. Both sides are engaged in discussions for an FTA and an investment treaty and new areas of cooperation include renewable energy and fisheries. India is executing several development projects in the Maldives through a mix of concessional lines of credit and buyer's credit facilities, with the flagship project being the Greater Malé Connectivity Project, which will connect four islands. Misri said the Maldives has almost completely drawn a currency swap arrangement for $400 million provided as emergency financial assistance and is set to draw upon another currency swap arrangement of ₹30 billion. The State Bank of India has also continued to re-subscribe to Maldives treasury bills. The two sides also have robust defence and security cooperation, including naval exercises, and India continues to assist the Maldives by training its defence personnel. 'We've been helping the Maldives enhance its capacity for EEZ surveillance and maritime domain awareness through the provision of ships and assets,' he said.
