MUMBAI, May 29 (Reuters) – Indian government bond yields are expected to favour a dipping bias in early deals on Thursday, after the 10-year benchmark bond yield broke a critical level in the previous session on bets of continued monetary policy easing.
The yield on the new benchmark 10-year bond is expected to move between 6.15% and 6.20%, a trader with a private bank said, compared with the previous close of 6.1743%, which was the lowest since September 2021.
The 2034 bond yield settled at 6.2383%.
“Bulls could be active today as well, as noise regarding something additional – apart from a rate cut in next week’s policy – are increasing. Still, we may not see large moves before auction and growth data tomorrow,” the trader said.
New Delhi will sell the benchmark 2035 bond worth 300 billion rupees ($3.51 billion) on Friday, followed by the release of the country’s economic growth data for January-March.
The economy likely grew 6.7% in the quarter, faster than the 6.2% in the previous quarter, according to a Reuters poll. The Reserve Bank of India’s policy decision is due on June 6, where a third consecutive rate cut of 25 basis points is widely expected.
The central bank has cut repo rate by 50 basis points since April and has infused around $100 billion in the last six months.
Some market participants speculated the RBI may undertake liquidity supportive measures, which pushed Indian treasury bill yields further below the policy rate corridor on Wednesday.
Overall, bond yields are expected to decline further as broader sentiment remains favourable. RATES Overnight index swap (OIS) rates are also likely to remain rangebound amid some consolidation, after witnessing a sharp decline over the last few weeks.
The one-year OIS witnessed some paying on Wednesday and ended at 5.56%, while the two-year OIS rate was at 5.46% and the most liquid five-year ended at 5.63%. KEY INDICATORS: ** Brent crude futures were 0.4% higher at $64.35 per barrel, after easing 1% in the previous session ** Ten-year U.S. Treasury yield was at 4.4634%; two-year yield at 3.9654% ** RBI to conduct one-day variable rate repo auction for 250 billion rupees ($1 = 85.3860 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman)
