India bond yields extend rise as market digests RBI stance shift
Indian government bond yields rose in early trade on Monday as investors weighed the central bank's surprise shift last week to a neutral policy stance, following a larger-than-expected
rate cut
.
The benchmark 10-year yield was at 6.2591% as of 10:00 a.m. IST, up from Friday's close of 6.2373%, while the five-year 6.75% 2029 bond was at 5.8344%, compared with 5.8150% previously.
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"For the day, we expect some caution to prevail, but if the upside is capped, then we can see some recovery in the coming days," a trader at a private bank said.
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Bond yields up despite higher rate cut
Bond Street witnessed a volatile trading day. The 10-year benchmark security yields increased. This happened despite the Reserve Bank of India's repo rate cut. The change in the central bank's policy stance impacted the yields. Experts predict the 10-year yield to stabilize. Some anticipate further rate cuts later in the year. The five-year bond yield experienced a slight decrease.
RBI's 50 bps rate cut sparks short-term bond rally, long-term yields stay subdued. What's ahead?
RBI accepts 95% of bond buyback ahead of monetary policy review
India plans increased bond buybacks and switches to secure sovereign rating upgrades
India bond traders suggest borrowing tweak to bring down long-term yields, sources say
Browse all Bonds News with
The Reserve Bank of India (RBI) delivered a larger-than-expected 50-basis point (bp) rate cut on Friday, its steepest in five years, but changed its policy stance to "neutral" from "accommodative", stating that it may have limited space for further easing.
RBI Governor
Sanjay Malhotra
said, after having cut rate by 100 bps, under the present circumstances, monetary policy is now left with very limited space to support growth.
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The central bank also announced a cut in banks'
cash reserve ratio
by 100 bps to 3%, adding to already surplus liquidity.
J.P. Morgan Chase
now expects 5.50% to be the terminal repo rate, against its earlier prediction of 5.00%.
The RBI may keep rates on hold until at least the end of this fiscal year, a snap Reuters poll of economists found after Friday's decision.
Still, Nomura is anticipating the RBI to cut rates by 25 bps each in October and December as growth and inflation are expected to undershoot targets. RATES
The shorter duration
overnight index swap
(OIS) rate was witnessing some downward move amid receiving interest, while other swaps were flat to higher.
The one-year OIS rate was 2 basis points down at 5.46%, while the two-year OIS rate was little changed at 5.44%, and the most liquid five-year was higher at 5.69%.
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