Bearish bias to persist in India bonds as demand dampens post RBI policy
MUMBAI: Indian government bond yields could continue to witness a mild uptick in early deals on Wednesday, as investor appetite has taken a beating after the Reserve Bank of India (RBI) changed its monetary policy stance.
The yield on the benchmark 10-year bond is expected to move between 6.27% and 6.33%, a trader at a private bank said, compared with the previous close of 6.2946%, which was the highest since May 9.
The five-year 6.75% 2029 bond yield ended at 5.9513% in the previous session.
Bond yields have been on a rising spree since Friday disappointed by the RBI's shift to 'neutral' stance, signalling limited scope for rate cuts, after it delivered an outsized 50-basis point reduction.
'We thought the market was showing signs of recovery in the aftermath of (the RBI) policy, but yesterday's state debt cutoffs spoiled the party and we are back in the bearish grip that should persist for today,' the trader said.
Weak demand for state debt at an auction on Tuesday, pushed yields, which move inversely to prices, above the 7% handle for the first time in this financial year.
India bond yields consolidate after previous week's sharp decline
It weighed on the overall market sentiment, negating the gains in bond prices made earlier in the day due to value purchases.
The central bank is likely to keep rates on hold for the rest of this fiscal year, according to a Reuters poll of economists.
The mid- to long-term bond yields have risen despite the steepest cut in policy rates in five years, as traders have chosen to focus on the central bank's guidance that the easing cycle is over, with some favouring the shorter end of the curve.
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