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Indian government bond yields are expected to edge lower in early trade on Friday amid growing anticipation of policy easing, though the decline may pause until the auction of a new 10-year note. The benchmark 10-year yield, which closed at 6.5166% on Wednesday, is projected to hover between 6.50% and 6.53% ahead of the government's sale of INR 320 billion in fresh 10-year bonds. On Wednesday, the RBI left rates unchanged at 5.50% but signalled space to support growth by lowering its inflation forecast to 2.6% and raising GDP growth estimates to 6.8%. Markets widely expect a rate cut in December.
Indian government bond yields are likely to continue their decline in early deals on Friday amid expectations of policy easing over the coming months, although the fall will be limited till the auction of a new 10-year note. Advertisement
The yield on the 10-year benchmark note IN063335G=CC is expected to move between 6.50% and 6.53% till the debt auction, after ending at 6.5166% on Wednesday, a trader at a private bank said.
Indian debt markets were shut on Thursday for a public holiday.
India will auction a fresh 10-year government bond later in the day to raise 320 billion rupees ($3.61 billion). This comes after New Delhi raised the share of the 10-year bond in its October-March borrowing plan.
"The major factor to look out for would be whether the momentum spills over in the cutoff for the new 10-year note today," the trader said.
On Wednesday, the Reserve Bank of India kept its policy rate unchanged at 5.50% as expected, but said that low inflation had opened up policy space for supporting growth.
The central bank raised its growth forecast for the financial year by 30 basis points to 6.8% and reduced inflation forecast by 50 basis points to 2.6%. RBI Governor Sanjay Malhotra said ongoing tariff and trade policy uncertainties will impact external demand.
Most market participants now expect a rate cut in December, when the committee meets next.
The RBI has cut rates by 100 basis points since the start of the year, but financial conditions tightened after the August policy meeting, when the central bank held rates and retained a neutral stance.
Source: Reuters
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