MUMBAI: India bond yields eased on Monday, recovering after an early rise triggered by a lower-than-expected RBI surplus transfe, as expectations of further monetary policy easing drove renewed investor interest in the debt market.
The yield on the new 10-year benchmark bond closed at 6.2046 per cent, down from 6.2107 per cent in the previous session. The yield on the 2034 bond ended at 6.2539 per cent, inching up slightly from Friday’s 6.2520 per cent close after hitting an intraday high of 6.2812 per cent.
While the Reserve Bank of India announced a surplus transfer of Rs2.69 trillion to the Centre for FY24 — below market expectations of over Rs3 trillion — traders largely shrugged off the shortfall, focusing instead on growing consensus around a rate cut at the June 6 policy review.
India bond yields are expected to trend lower, with the RBI having already cut the policy repo rate by 50 basis points since April and injected liquidity worth nearly $100 billion over the past six months.
“Despite the liquidity overhang from the surplus transfer and upcoming inflows, the path for easing remains intact. We see the terminal policy rate falling to 5.25 per cent,” said an economist based in Mumbai.
Short-term overnight index swaps (OIS) remained stable, with the one-year OIS at 5.53 per cent and two-year at 5.44 per cent. The five-year OIS inched down to 5.62 per cent.
The market will be closely watching India’s Q4 GDP data, due Friday, with forecasts pointing to 6.7 per cent growth — an uptick from the previous quarter’s 6.2 per cent. Analysts believe this could further shape RBI’s stance in the upcoming policy review.
